This Day On The Street
Continue to site
ADVERTISEMENT
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

Deal Wizard Meets His Match in China

Heckmann says that, "in an abundance of caution," he demanded that China Water set aside millions of dollars as a reserve, in case taxes were owed.

Only later, as the revenue story unraveled, did he realize he had reserved millions to pay taxes on revenues that didn't exist, Heckmann says.

Heckmann recalls that he spent most of 2009 and 2010 in a state of high anxiety, frantically working to salvage what he could.

"I had nights and nights and nights where I laid there staring at the ceiling saying: What could we have done differently? How could you be this stupid?" he says. "But it's not that I was stupid. When I look somebody in the eye, and he tells me something, and he's an executive, I tend to believe him -- or at least believe there's some great basis to what he says, not that he's just telling me what I want to hear."

Heckmann and Xu are now ensnarled in a complex legal battle in Delaware, with Xu claiming that Heckmann owes him millions in locked-up stock and Heckmann claiming that Xu defrauded him. Xu's lawyers at Cadwalader Wickersham & Taft claim that, even if the charges of fraud were true -- Xu denies them -- Xu would be entitled to the stock, under the terms of a severance contract signed by Heckmann.

Heckmann's side has said that, if they win, the shares in dispute -- now counted as outstanding shares -- will be canceled. Heckmann has claimed in court papers that Xu Hong Bin is a phony name for a man with a criminal record in China. Court filings lack detail on that claim.

Meantime, Heckmann says his new company is growing. There were some real customers, including Coca-Cola, and those accounts are going well, Heckmann says. The company has been buoyed by the continuing boom in China, and Heckmann believes the investors who trusted his instincts will do well, in the end.

But he now takes a dim view of reverse mergers -- "I wouldn't trust one of them," he says -- and advises caution on Chinese companies generally.

"If someone lies to you in the U.S., you can get him. If someone lies to you in China, you can't," he says. "I've lost my confidence that I can figure it out."

-- Reported by Scott Eden in New York

>To contact the writer of this article, click here: Scott Eden.

>To follow the writer on Twitter, go to http://twitter.com/ScottEden.

>To submit a news tip, send an email to: tips@thestreet.com.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.
8 of 8

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Submit an article to us!
SYM TRADE IT LAST %CHG
RODM $25.94 0.75%
HEK $0.00 0.00%
CBAK $3.51 -4.88%
GS $199.30 0.90%
JAH $51.24 -0.72%

Markets

DOW 18,070.40 +46.34 0.26%
S&P 500 2,114.49 +6.20 0.29%
NASDAQ 5,016.9290 +11.5380 0.23%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs