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Suntech sacrifice may push firms to shape up accounting

By Doug Young (Global Times)

13:11, August 21, 2012

The past two weeks have seen the Chinese solar energy pioneer Suntech Power Holdings Co Ltd plunge into a downward spiral after revelations of questionable accounting, leaving the firm on the edge of financial collapse and its fate largely in the hands of Beijing. But rather than rescue Suntech, Beijing should let the company collapse to send a message that it won't support companies that engage in such financial shenanigans.

Suntech was once one of China's brightest stars, making international headlines when it became the country's first solar panel maker to list overseas in 2005. But its woes began a year ago when the global solar sector started to suffer from massive oversupply that sent most major players into the red.

While the downturn wreaked havoc on everyone, Suntech's own woes grew considerably worse a couple of weeks ago when it disclosed that it may have been the victim of fraud that could leave it liable for guaranteeing a third-party loan worth over $600 million.

As the scandal unraveled, it became increasingly apparent that the company that allegedly defrauded Suntech, called GSF, was majority-owned by Suntech. Furthermore, it appeared that Suntech had been selling its panels to GSF for years at high prices and including the sales in its quarterly reports - a practice that may have been technically legal but was still highly misleading to investors.

These revelations have crushed Suntech's stock, which now trades at around $1 - far below its all-time high of more than $80 per share and well under its 2005 initial public offering price of $15.

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