About Us  |   Contact Us  |   Register  | Login  |   

Follow HedgeWorld on Twitter HedgeWorld on LinkedIn






HEDGEWORLD NEWS
Search the News
Advanced News Search
HedgeWorld News by Region
United States / Americas
Europe
Asia / Australia
International
HedgeWorld News Sections
Managed Futures & Derivatives
Daily News
Regulatory/Legal
Strategies/Analysis
Technology
Opinion
People
Indexes
Other News Features
Most Popular
LexisNexis Headlines
Reuters Headlines
The HedgeWorld Blog
Alternative Advantage Daily Newsletter
RSS Service
Sign Up For Email News Alerts
Reprints



U.S. SEC charges China MediaExpress, CEO with fraud
06/20/2013 Email this story  |  Printable Version

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 "reverse merger."

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 companies.

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 investigations.

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.


Email This Story to a Friend   |   Display Printable Version of This Story

Story Copyright © 1999-2014 Reuters HedgeWorld All rights reserved.

HedgeWorld News is sponsored by:






Lipper    Privacy   User Policy  Legal Disclosure Copyright/DMCA  Site Map    FAQ    Glossary  Thomson Reuters for Hedge Funds
All rights reserved. Users may download and print extracts of content from this website for their own personal and non-commercial use only. Republication or redistribution of HedgeWorld content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. HedgeWorld is a registered trademark of Thomson Reuters.