NEW YORK (TheStreet) -- The plot just thickened when it comes to the prospects for China North East Petroleum (NEP) - Get Report, whose shares were delisted from the American Stock Exchange in May after revelations that the company had misstated financial and oil-reserve data going back two years, and that its CEO may have embezzled company funds.
In a filing with the
Securities and Exchange Commission
Thursday, the company announced that one of its directors, Robert Bruce, resigned on Aug. 8.
In a letter to China North East management that was included in the filing, Bruce criticized the rigor of the company's auditing even as it attempts to go through the books again and restate results from the beginning of 2008 through the current period. In his letter, Bruce said there was "substantial disagreement" between him and the company's managers regarding the ongoing audit process.
He went on to suggest in his resignation letter that China North East may have illegally paid off Chinese authorities.
"I strongly believe that substantial additional investigation is required in order for the Company and/or the members of the board to be confident that the Company's previously filed financial reports and associated financial statements are materially correct under U.S. Generally Accepted Accounting Principles," Bruce wrote, "and that the Company has not made payments to government officials as proscribed by the U.S. Foreign Corrupt Practices Act."
Bruce, who didn't immediately respond to a call seeking comment, also urged the company to include in the SEC filing a previous letter (dated July 22) he'd sent to the China North East board, which presumably detailed further points regarding his dispute with the company. The older letter was not appended to the filing.
Representatives for China North East were not immediately available for comment.
Bruce, the president of the investment firm Oakmont Advisory of Portland, Maine, had served on the board since May 2008.
Since the revelations and the delisting, China North East has been the subject of a slew of shareholder class-action complaints. But the company has seemingly made moves to clear the decks. In May, it announced the resignation of its CEO and one of its directors after discovering preliminary evidence that cash transfers may have been made between the bank accounts of the company and the personal accounts of the CEO, Hongjung Wang, and the director, Guizhi Ju.
Ju is the CEO's mother.
China North East, birthed in 2007 from the obscure world of micro-cap reverse mergers, explores for and extracts oil in the northeast part of the country.
Pending the refiling of its financial statements with the SEC and the potential re-listing of its shares, China North East stock remains locked at $5.50. It had lost more than half its value since reaching an all-time high of $11.39 in January.
-- Written by Scott Eden in New York
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