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

L.A. Firm's China Ventures Turn Sour (Pt. 2)

This is the second of a two-part series on Westpark Capital, accounting firm MaloneBailey and recent allegations of improper accounting at a handful of Chinese companies. Click here for Part 1 of this story.

'Major Discrepancies'

When MaloneBailey alleged that it had discovered forged bank documents at more than a third of its 25 Chinese clients, it appeared to happen at the last possible second, just as companies were about to file their annual 10-Ks with the SEC. The late-breaking news sent some executives reeling.

That includes China Electric Motor's CFO, "Dexter" Heung Sang Fong, who spoke with TheStreet from his home in Northern California. (Like Fong, many CFOs of Chinese reverse-merger companies live in the U.S., thousands of miles away from their employers.) Fong said that China Electric was set to file its 10-K on Thursday, March 31. As late as Tuesday, one of MaloneBailey's audit partners told China Electric's board that "nothing material" had turned up in the audit and that the company could file as planned -- no worries.

By the following morning, however, the auditor's opinion had radically changed, Fong says. MaloneBailey had found "major discrepancies" in the company's books. The discrepancies involved forged bank documents, the auditor told Fong.

"I was shocked," Fong says.

George Qin, the partner in charge of Chinese clients at MaloneBailey, declined to comment on China Electric Motor or Fong's version of events. But, Qin said, "Our work is very hard. It takes a lot of time. The falsified documents, some of them we might have found at the last minute. But I can assure you. As soon as we found those frauds -- because those are massive frauds -- as soon as we found those, we notified the board of directors."

Investigating Chinese Reverse Mergers

Fong took over as China Electric's finance chief in June 2010 after serving as a director for the previous six months. The CFO post didn't lead to greater transparency for him -- and Fong, who spent a year as finance chief for another Chinese reverse-merger company called Apollo Solar Energy (ASOE), didn't expect it to.

"To be honest, I have no control or access to the company's bank accounts in China," Fong told TheStreet. "Ninety percent of Chinese companies don't let their CFOs have access to bank accounts in China."

1 of 4

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
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!
SYM TRADE IT LAST %CHG
CELM $0.12 96.72%
RODM $25.94 0.00%
AAPL $130.28 0.00%
FB $81.53 0.00%
GOOG $565.06 0.00%

Markets

DOW 18,080.14 +21.45 0.12%
S&P 500 2,117.69 +4.76 0.23%
NASDAQ 5,092.0850 +36.0220 0.71%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs