NEW YORK (
has announced the voluntary resignation of Allen Chan as its CEO, chairman and a director until the company can complete an investigation of fraud allegations made by
, an independent research firm and short seller.
The Toronto-based operator of commercial forest plantations in China previously appointed a committee to explore the claims of Muddy Waters, which
, characterizing the company as a "multi-billion dollar ponzi scheme."
Shares of Sino-Forest, as quoted over-the-counter on the Pink Sheets, closed Friday at $1.38, down 70%, on volume of more than 15 million. The stock closed at $18.64 on June 1, the day before Muddy Waters issued its rating.
News of Chan stepping down comes after the Ontario Securities Commission ordered suspension of trading in the stock on the Toronto Stock Exchange on Friday morning. The regulator, which says its own probe of Sino-Forest has raised questions about its accounting and potential misrepresentation of revenue, initially called for the resignation of Chan and other executives on Friday but later rescinded that request.
Sino-Forest named William Ardell, its lead director and chairman of the independent committee, to serve as chairman, and Judson Martin, executive director and vice chairman, to serve as CEO. The company has also disclosed it has placed three employees on administrative leave and that a fourth senior employee is working only with Martin and assisting with the company's own ongoing review. Sino-Forest said these steps followed the uncovering of "certain information" during its review subsequent to the release of its fiscal second-quarter results on Aug. 15 but before the Ontario Securities Commission's order was issued.
"The allegations made in the OSC's temporary order, while unproven, are of a serious nature," Sino-Forest said in a statement, adding later: "In these circumstances, the Independent Committee has not yet reached any conclusions. The Company has been cooperating with the OSC throughout, including by responding to numerous and extensive information requests and by providing regular periodic briefings."
it expects to issue an interim report within four to six weeks.
Chan, who Sino-Forest said "expressed his willingness to step aside" before the OSC issued its order, was appointed founding chairman emeritus and is assisting the independent committee with its review, the company said.
Written by Michael Baron in New York.
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