Three Sino-Forest Corp. executives were fired by the insolvent Chinese timber firm and the company’s co-founder and chief financial officer both resigned, in a prelude to formal allegations expected to be laid by the Ontario Securities Commission.
Allen Chan, the Hong Kong national who co-founded Sino-Forest two decades ago and helped build what was once the largest forestry company on the TSX, resigned as “founding chairman emeritus” and an employee, the company said in a statement.
Mr. Chan informed Sino-Forest’s board of directors he wished to resign after he received an enforcement notice from the OSC earlier this month indicating the regulator was close to laying out its case that he and otherSino-Forest executives misled investors.
Mr. Chan had previously resigned as chairman and chief executive officer in late August when the OSC halted trading in Sino-Forest shares and alleged that he participated in behaviour that he knew or should have known perpetuated a fraud. He remained an employee of the company, however, assisting a director’s committee investigating the fraud allegations first made by short-seller Carson Block and his firm Muddy Waters LLC in a June research report.
The resignation marks the formal severing of ties between Toronto-based Sino-Forest and the man who was a key architect of its timber business in mainland China. Sino-Forest has put its assets up for sale and the company said Mr. Chan indicated he “remains available” to assist helping stakeholders “realize value in relation to assets located in the People’s Republic of China.”
Three other executives, Alfred Hung, vice-president of planning and banking, George Ho, vice-president of finance and Simon Yeung, a vice-president of operations of subsidiary Sino-Panel (Asia) Inc., were fired, Sino-Forest said. Albert Ip, a senior vice-president who had previously resigned, willnot serve as a consultant to the company.
These executives, like Mr. Chan, also received enforcement notices from the OSC in early April, indicating the regulator was preparing formal allegations against them and the company. According to Sino-Forest, the OSC has zeroed in on potential breaches of the provincial securities act relating to fraud, market manipulation and making untrue or misleading statements.
“Following receipt of the enforcement notice directed at the company, further discussions with staff of the commission, together with examination of issues indentified in the enforcement notice received by the company, the board of directors of the company determined it was in the best interest of Sino-Forest to terminate the employment of Messrs. Hung, Ho and Yeung and not to enter into a consulting arrangement with Mr. Ip,” Sino-Forest said.
David Horsley, who has served as Sino-Forest’s chief financial officer since 2005, also resigned. A Canadian citizen, who served as a Sino-Forest board member between 2004 and 2006, Mr. Horsley also received an enforcement notice from the OSC.
Sino-Forest said its board “believes that the nature of the allegations made against Mr. Horsley in the enforcement notice differ substantially from those directed at other individuals who received enforcement notices.”
The company said that after conferring with FTI Consulting, the court appointed monitor in its proceedings under the Companies’ Creditors Arrangement Act, it “has determined that it is in the best interests of the company to retain Mr. Horsley’s services” while allowing him to step down as CFO.
Sino-Forest said it will file a court motion as part of the CCAA proceedings to “enhance the powers of the monitor” to provide additional assistance to the company “in light of the personnel changes.”
A Sino-Forest spokesman would not comment beyond the company’s statement.