August 24 – Jilin Zixin Pharmaceutical Industrial (002118.SZ) is under regulatory investigation for manipulating high earning growths, reports the Shanghai Securities Journal. Authorities have been in talks with some of the company’s executives, requiring them to clarify several issues.

Share trading of the company’s stock will resume after the investigation wraps up, although the source did not indicate when that might be. Authorities were attracted to claims of manipulation of ginseng trading in 2010.

A journalist had traveled to seven counties and cities across the three provinces of Jilin, Sichuan and Anhui to investigate the company in early August after Zixin Pharmaceutical recorded a surge in both sales revenues and net profits in 2010. The company’s major upstream and downstream firms all had relationships with Zixin Pharmaceutical Industry and its controlling shareholder, the Guo Family. The journalist then published an in-depth investigation titled Zixin Pharmaceutical Industrial’s Swindle.

The source said that Zixin Pharmaceutical was essentially free to tweak the scale of its earnings and revenues if it controls the entire industry chain. That left the company open to allegations that many of its transactions were fabricated.

The source added that during the journalist’s investigation, Zixin Pharmaceutical’s business tactics were found to be less than ethical, even under-handed at times. The various financial organizations and agencies that served the pharmaceutical maker were also suspected of collaborating with the firm in breaking the law. No further details were given, however.

Source:CapitalVue