A COMPLAINT against a Chinese commercial vehicle dealer for alleged stock manipulation offers insights into practices being uncovered as US market regulators tighten scrutiny of China-based companies that are traded on Wall Street.
AutoChina International Ltd, which is based in the northern Chinese city of Shijiazhuang, rejected accusations raised in a civil lawsuit filed on Wednesday by the US Securities and Exchange Commission, saying that the case was "without merit."
The SEC alleges that AutoChina and 11 investors made hundreds of false trades between October 2010 and February 2012, aiming to boost trading volume in the company's shares to help improve its prospects for obtaining financing.
The case is the third in less than two months as the SEC probes accounting and other practices by hundreds of Chinese companies trading in the United States.
"The company intends to defend itself against the claims vigorously and believes that all of the evidence it is aware of contradicts the SEC's allegations," AutoChina said in a statement.
Last week, a US court froze the accounts of six Chinese citizens accused of illegally trading shares of Chinese food processor Zhongpin Inc.
The SEC insider trading complaint alleges the defendants made more than US$9 million by trading in Zhongpin ahead of the company's announcement of an offer to take it private.
In late February, the SEC filed civil fraud charges against the chairman and the former CEO of Puda Coal Inc, accusing them of duping people to invest in a coal company that was actually an empty shell.
Unlike some companies that have been delisted for being defunct or lacking an actual operating business, AutoChina says it is a leading commercial vehicle sales and leasing company and passenger car dealer, with a national network.
It reported US$490.7 million in revenue in the first nine months of 2011, with net profit of US$19.3 million, compared to a net loss of US$58.7 million in the same period the year before.
'Unfortunate coincidence'
"AutoChina's operations are real," the company said in a release last September, when it announced that it was dismissing its auditor, PricewaterhouseCoopers Zhong Tian CPAs Ltd due to differences over the timing for filing overdue financial reports.
"We have always held steadfast to the belief that AutoChina would weather the storm created by the unfortunate coincidence that there have been instances of fraud in certain other US-listed, China-based companies," it said.
According to SEC documents filed with the US District Court of Massachusetts, the company and 11 investors made hundreds of false trades starting in October 2010, using more than US$60 million that had been deposited in US brokerage accounts.
Many of the trades were done through the same computers or computer networks, it said.
Several of the defendants named in the SEC lawsuit are relatives of AutoChina's chairman and founder, Yong Huili. The SEC said several others are AutoChina employees.
Source:shanghaidaily