Sino-Forest trading could be permanently ended amid fraud allegations

By Caroline Salls

Pittsburgh, May 23 - The Ontario Securities Commission (OSC) will decide at a July 12 meeting whether to continue a temporary order issued against Sino-Forest Corp., Allen Chan, Albert Ip, Alfred Hung, George Ho and Simon Yeung in August 2011 and whether to permanently cease trading in any Sino-Forest securities in connection with fraud allegations, according to an OSC news release.

The OSC will also decide whether to permanently cease trading in any securities by Sino-Forest, Chan, Ip, Hung, Ho, Yeung and David Horsley, as well as whether to permanently prohibit their acquisition of any securities.

The commission will also consider whether the company and other respondents should be reprimanded; whether Chan, Ip, Hung, Ho, Yeung and Horsley should resign all positions they hold as an officer or director of any issuer, registrant or investment fund manager; and whether they should be permanently prohibited from becoming an officer or director or acting as a registrant, investment fund manager or promoter.

The OSC said it would decide whether to impose an up to $1 million administrative penalty on each of the respondents for failure to comply with Ontario securities law and whether the respondents should disgorge to the commission any amounts obtained as a result of non-compliance.

According to a statement of allegations filed by the OSC, Sino-Forest and its former senior executives, including Chan, Ip, Hung, Ho and Yeung "engaged in a complex fraudulent scheme to inflate the assets and revenue of Sino-Forest and made materially misleading statements in Sino-Forest's public disclosure record related to its primary business."

The commission said former Sino-Forest chairman of the board and chief executive officer Chan also committed fraud in connection with Sino-Forest's purchase of a controlling interest in a company now known as Greenheart Group Ltd.

By concealing Chan's substantial interest in this transaction, the OSC alleged that Chan and Sino-Forest made materially misleading statements in Sino-Forest's public disclosure record.

In addition, the commission alleged that Chan, Ip, Hung, Ho and Yeung all materially misled OSC staff during the investigation of this matter.

Former Sino-Forest senior vice president and chief financial officer Horsley allegedly did not comply with Ontario securities law and "acted contrary to the public interest," the statement said.

The commission said the "dishonest and deceitful courses of conduct by Sino-Forest and overseas management put the pecuniary interests of investors at risk, constituting fraud."

"Together, these courses of conduct made the public disclosure record of Sino-Forest so misleading that it was fraudulent," the OSC said.

Toronto-based Sino-Forest is a commercial forest plantation operator in China.

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