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7 Suspects Involved in Guangxia Fabrication Case Detained
Spokesman for China Securities Regulatory Commission (CSRC) recently said that CSRC has found through investigation that the Guangxia (Yinchuan) Industry Co. Ltd. has fabricated a huge amount of profits to the tune of 745 million yuan through various means, according to Financial Times. Meanwhile, the Shenzhen Zhongtianqin Accountant Office and its certified public accountant, in violation of related laws and regulations, issued to Guangxia an auditing report that was seriously inconsistent with facts. CSRC has legally transferred seven suspects involved in the case to public security organs which will give them criminal sanctions. Meanwhile, Guangxia would again put up its plate and resume business on September 10. It would sink into the ranks of being a PT company for its suffering of loss for two and a half years.
Seven People Transferred to Judicial Organs
The CSRC spokesman didn't disclose who were those specifically involved in the case., but reporters have learned from related sources that the suspects include: Li Youqiang, former president and vice-chairman of Guangxia (removed from office on September 1); Ding Gongmin, general finance inspector and chief accountant of Guangxia; Dong Bo, former Guangxia (Tianjin) chairman (removed from office on August 7); Yan Jindai, former general manager of Guangxia (Tianjin); Liu Jiarong, accountant of Shenzhen Zhongtianqin Accountant Office, and two others.
On August 3, 2001, after media exposed the case of Guangxia's serious fabrication in 1999 and 2000, CSRC sent out an investigation team of 20 people to Yinchuan, Tianjin and Shanghai on the same day to probe into the case of Guangxia's fabrication and its manipulation of the secondary market price. On the eve of the publication of Guangxia's mid-year report, the investigation team gathered in Yinchuan to hold a three-day meeting, then it urged Guangxia to publish the 2001 mid- year report on September 1.
Debts exceeds 1.6 billion yuan
The investigation result published by CSRC on September 6 shows: Guangxia (Yinchuan) fabricated its business income--a huge profit of 745 million yuan by way of counterfeiting purchasing and selling contracts, export bill of entry, added value tax invoices, duty-free documents and financial notes. Of the total sum of profits, 178 million yuan went to 1999 and 567 million yuan to 2000.
Given this, the myth about Guangxia's brilliant achievement has been exploded and replaced by its deficit incurred in two and a half years.
The net profit of 127 million yuan published in Guangxia's 1999 annual report and profit for each share 0.51 yuan should be adjusted to minus 51 million yuan and minus 0.202 yuan respectively. The 2000 figures of 417 million yuan and 0.827 yuan should be adjusted to minus 150 million yuan and minus 0.297 yuan. (the above are reporter's estimation). These, plus its 2001 mid-year report published on September 1, its net profit of minus 19.53 million yuan and profit for each share of minus 0.039 yuan, have made it fully deserve to be listed as a PT company.
Guangxia's 2001 mid-year report also shows that Guangxia claims a total asset of 2.2 billion yuan and debts over 1.6 billion yuan. Insiders disclose that these debts include bank loans of 1.52 billion yuan, and 80 million yuan three-year company bonds issued in 1999. The Industrial and Commercial Bank of China, which stopped issuing loans earlier in May, had granted a total of over 700 million yuan to Guangxia.
Guangxia to Resume Stock Business on September 10
At around 17 o'clock on the afternoon of September 6, Guangxia Company announced on its own website: "the false report on a huge amount of profits given by Tianjin Guangxia (Group) Co. Ltd., a subsidiary of our company, has led to the distortion of related information about the company's profits made in 1999 and 2000.. CSRC's investigation result had been published on September 6, our company will resume its stock business at 9:30 on September 10."
According to insiders' analysis, once Guangxia (Yinchuan) resumes business, it is entirely possible for organs controlling huge amounts of counters in their hands to seal up the market quotation through large numbers of selling bills, while medium and small investors simply find nowhere to escape, even if a favorable turn may appear on the market, medium and small investors' turn may possibly not come.
In view of this, after Guangxia resumes it stock business, it's still necessary to check up on Guangxia's behavior of manipulating the stock price on the secondary market, and require that the manipulators return the staggering profits they reaped in Guangxia. This is the necessary condition for the medium and samall investors to finally and really get civil compensation, it is also the key to strengthening investors' confidence.
By PD Online staff member Li Heng
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