This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

SEC Settles Probe of Auditor in China Case

NEW YORK (TheStreet) -- The Securities and Exchange Commission Monday announced a settlement with an auditing firm in relation to allegations of professional misconduct stemming from the material overstatement of the financial results by a Chinese maker of energy-efficient equipment in 2004 and 2005.

The SEC said it has reached the settlement with Moore Stephens Wurth Frazer & Torbet LLP and Kelly Dean Yamagata, a partner with the firm, with regard to their work with China Energy Savings Technology.

Among the provisions of the settlement, Moore Stephens is required to retain an independent consultant within 30 days. That consultant will then evaluate the firm and issue a report, the recommendations of which Moore Stephens will have to satisfy in order to regain compliance with SEC standards. In the meantime, the firm is barred from accepting any new auditor clients in China, Hong Kong and Taiwan. Yamagata is also facing a number of penalties, including being able to appear or practice before the SEC as an accountant.

The parties are also ordered to pay penalties reflecting disgorgement of fees and prejudgment interest that total $129,500 within thirty days.

China Energy Savings Technology was a Chinese reverse merger that gained listing on the Nasdaq in 2005. The company was hit a year later by an SEC complaint that said the company hired a U.S. stock promoter to falsely obtain a listing on the Nasdaq.

According to the SEC's complaint, Jason Genet helped China Energy give away shares to hundreds of investors, "creating the false and misleading impression that China Energy had a bona fide and active shareholder base."

In addition, Genet engaged in unregistered distributions of securities, and he entered into secret arrangements to give away China Energy stock to investors who agreed to purchase China Energy stock in the open market, according to the SEC's complaint.

In Monday's settlement order, the SEC contended that Moore Stephens "encountered audit conditions that should have caused them to exercise heightened skepticism," including the discovery of problems with China Energy's internal controls and difficulties completing audit field work, such as inventory not being located where the company said it would be.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,880.36 -31.75 -0.19%
S&P 500 1,970.07 +0.12 0.01%
NASDAQ 4,462.9020 +20.2040 0.45%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs