BEIJING, Sept. 30, 2012 /PRNewswire/ -- New Oriental Education and Technology Group Inc. (the "Company" or "New Oriental") (NYSE: EDU), the largest provider of private educational services in China, today announced that the Special Committee of the Board of Directors of the Company (the "Special Committee") has completed its review of certain allegations raised in a report issued by Muddy Waters on July 18, 2012 and has found no significant evidence to support these allegations. As previously announced, the Special Committee was formed on July 20, 2012, and is comprised of the three independent Directors of the Company, Mr. Denny Lee, Mr. Robin Yanhong Li, and Dr. John Zhuang Yang. The Special Committee retained Simpson Thacher & Bartlett LLP ("Simpson Thacher") to assist it in conducting an independent review of certain allegations contained in the Muddy Waters report; Simpson Thacher, in turn, has been assisted in its efforts by Ernst & Young ( China) Advisory Limited and Commerce & Finance Law Offices.
Together with Simpson Thacher, the Special Committee focused its investigation on the three core allegations articulated in the Muddy Waters report, summarized as follows: (1) the allegation that some or all of the Company's schools are actually franchises-in-disguise and thus inaccurately inflate the Company's count of its own schools and its revenue said to be derived therefrom; (2) the allegation that the Company's financial statements do not accurately reflect enterprise income tax paid by the Beijing Haidian school; and (3) the allegation that the Company's consolidation of the financial results of the variable interest entity and its subsidiaries (collectively, the "VIE") into its own financials is improper because the Company does not have sufficient control over the VIE necessary for consolidation under U.S. GAAP. The scope of the Special Committee's investigation did not extend to examination of various general and un-particularized allegations for which the Muddy Waters report provided no specific detail.
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