By Sarah N. Lynch
WASHINGTON, June 20 (Reuters) - The U.S. Securities and
Exchange Commission charged defunct company China MediaExpress
and its chief executive officer on Thursday with misleading
investors, the agency's latest case alleging fraud at a
U.S.-listed China-based company.
The SEC alleges that China MediaExpress falsely reported
increases in its business operations, profits and overall
financial condition as soon as it became a publicly traded
company in October 2009 through a backdoor method known as a
Its chairman and chief executive, Zheng Cheng, also signed
and attested to the accuracy of false public filings, and later
tried to pay off a senior accountant who was investigating
possible fraud at the company, the SEC alleged.
An attorney for the company did not immediately return a
call or email seeking comment.
Nasdaq delisted the company's stock In May of 2011. The SEC
deregistered its securities in March 2012.
The China MediaExpress case is the latest in a long-running
crackdown by the SEC into accounting fraud at China-based
companies that are listed on U.S. stock exchanges. Often the
companies listed through reverse mergers with dormant shell
Accounting scandals at many of these companies have prompted
auditor resignations, and led the SEC to launch investigations
into the companies, their executives and their auditors.
To date, the SEC said its Cross-Border Working Group has
filed more than 65 fraud cases against companies or executives,
and deregistered the securities of more than 50 companies.
The SEC in December charged the Chinese affiliates of
Deloitte, KPMG, PricewaterhouseCoopers
, BDO and Ernst & Young with violating the law
by refusing to hand over documents to aid the agency's
That case is still pending, and a hearing in the SEC's
administrative court on the matter is slated for July 8.
In this latest case, the SEC said China MediaExpress falsely
claimed in its 2009 annual report that it had $57 million in
cash on hand when it only had a cash balance of $141,000. It
also misrepresented its cash balances in press releases as well.
After it misrepresented its financial condition, the SEC
said the stock price tripled to more than $20 a share. The
company's auditor resigned in March 2011.
The company's audit committee launched an internal
investigation and hired a Hong Kong forensic accounting firm.
The SEC said Zheng tried to bribe the accountant handling the
probe with $1.5 million, but the accountant refused.