Sino-Forest CEO resigns as regulator expresses fraud concerns
The chairman and CEO of Sino-Forest has resigned and three employees have been temporarily suspended after the Ontario Securities Commission said the company may have misrepresented its revenue statements and exaggerated its timber holdings. It added that Sino-Forest "appears to have engaged in significant non-arm's-length transactions which may have been contrary to Ontario securities laws and the public interest."
A 15-day trading ban has been imposed on the company's shares.
The commission's announcement comes nearly three months after short-seller research firm Muddy Waters accused Sino-Forest of overstating its assets and defrauding investors by routing funds off the books through a web of intermediaries. Sino-Forest denies any wrongdoing and has asked a committee of independent directors to investigate the matter.
The company said Allen Chan voluntarily stepped down as chairman and CEO. He has now been appointed founding chairman emeritus and will continue to assist the internal investigation that arose from Muddy Waters' claims. William Ardell, lead director and chairman of the independent investigation committee, will succeed Chan as company chairman with Judson Martin, an executive director, becoming CEO.
The company said last week that the committee's review had been delayed until the end of the year but that an interim report of its findings is due for publication in 4-6 weeks.
Sino-Forest's stock closed at C$4.81 on Thursday, down 5.7%. Since the start of the year, the stock has lost 72% of its value. Hedge fund Paulson & Co. exited its stake in the company in June, citing uncertainty over public disclosures and financial statements. However, Mandolin Fund, which is run by New Zealand-born billionaire Richard Chandler, has increased its holding in the company in recent weeks. The fund now owns 18% of Sino-Forest.
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