Changhong accused of financial frauds
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Informants say Sichuan Changhong Electric Co, Ltd has been falsifying its financial reports for more than ten years, and authorities have begun looking into the case, the China Business News reported today.
One of the accusations is that the company invented about 5 billion yuan ($732.4 million) in sales.
According to the report, Sichuan Changhong cheated in its 1998 financial report by listing 2.25 billion yuan as trade acceptance, as it stopped settling accounts through this kind of commercial papers in 1992, informants said in their reports.
The company duplicated sales revenue of about 2 billion yuan in January 1997 into its books for 1998, according to the report. Moreover, it failed to record the full sum of losses into its account in 1998.
Sichuan Changhong's tactics were intended to win qualification for shares allotment, Fan Dejun, a previous sales director in charge of Changhong's sales in Hunan province, told the newspaper.
Sichuan Changhong reported 11.60 billion yuan in principal operations, and 3.16 billion yuan in operating profits in 1998.
If true, the company's shares allotments in 1999 and 2009 should be illegal and investors would be able to sue for damages, said Song Yixin, partner of Shanghai Newhope Law Firm.
Sichuan Changhong denied the report later today. Its spokesman Liu Haizhong said that Fan was sentenced to jails for misappropriation and embezzlement in 2000.
After his release in 2007, Fan has been harassing the company for "rehabilitation" and "reimbursement". He began to defame the company after being rejected, Liu said in a statement.
Sichuan Changhong was listed on the Shanghai Stock Exchange in March, 1994. Its shares fell 1.4 percent to 7.41 yuan today.
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