The question posed by the Soleil analyst was also a good reason for Trina to remove any link to A-Power. "They are severing ties with anyone who could be a liability from a public relations perspective. Across the sector everyone will start to scrutinize who is on their board and we may see more of these," the Mizuho Securities analyst said.
The solar analysts said that Trina Solar has been among the Chinese solar companies considered the best at complying with Western accounting standards. "I think there's little question that Trina has been among the Chinese solar companies considered a cut above the rest when it comes to financial reporting and quality of numbers," Leming said.
Mak also resigned from Trina's board, effective last Monday, and the company has named Jerome Corcoran to serve as chairman of the audit committee. Corcoran is a former managing director at Merrill Lynch's China Private Equity Group, and he served on Trina's audit committee from December 2006 through April 2010.
The fallout from the A-Power scandal runs all the way to Capitol Hill, with Senate Majority Leader Harry Reid (D-Nev.) having negotiated a deal with the Chinese company to build a wind turbine manufacturing plant in Nevada last year.
For solar investors more generally it would be a wise idea to consult the publicly available information related to the composition of audit committees as a first step to analyzing risks that had not been previously considered. The Trina announcement about Mak's resignation comes more than two weeks after A-Power shares were halted and a week after Mak's resignation from A-Power.
In the Mak biography included in Trina's annual filing with the SEC, the solar company did not list A-Power Energy CFO as one of the positions held by Mak throughout his career, though it lists more than a dozen corporate positions Mak has held.
Mizuho's Clegg said that the official message from Trina Solar in his conversation with them was not just that Mak decided to resign his position, but in fact, Trina hadn't even been aware that Mak had joined A-Power as CFO after already being a member of the Trina audit committee.
From one perspective, Trina's ignorance about Mak's A-Power role suggests Mak may not have been very involved in Trina's operations. Yet it's also fair to ask if there are holes in Trina's due diligence process based on its lack of knowledge, and in the least, Trina was "caught with egg on its face."
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-- Written by Eric Rosenbaum from New York.
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