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.
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."
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
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.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
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.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV