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“It’s no secret we’re interfering with scams that could net these chairmen tens of millions of dollars,” said Mr. Block, who is 35. “Criminals deprived of such amounts will not take a kind stance towards people like me.”

On Nov. 10, 2010, his fledgling firm published a strongly critical report on RINO International Corp, charging that many of the company’s customers were nonexistent and that its accounting “has serious flaws that are clear signs of cooked books.”

Shortly after, Mr. Block received threatening letters warning him to retract his allegations and explaining that “severe consequences may result if you do not act appropriately.” An e-mail received two days later mentioned his wife, Kathy: “Are you, Kathy and your dad ready for a bullet? Get ready. It could happen at any time now.”

Less than a week later, RINO’s auditors found accounting flaws. One month after the Muddy Waters report, the clean-tech company was delisted by Nasdaq. Its shares had fallen 96 per cent from a 52-week high reached in October.

Mr. Block is based in Asia, though he would not say exactly where. He didn’t contact the authorities, saying he was “more worried about the people whose threats I haven’t received,” but he did take additional security measures.

After his report on China MediaExpress, Mr. Block said he received more threatening e-mails. One of them was from an Auckland, New Zealand-based investor named Rick Page. He wrote in one email seen by Reuters that Mr. Block may meet “somebody’s ‘contract worker’. Who knows who, when or...where.”

Reached by Reuters, Mr. Page acknowledged “acrimonious contact” with Mr. Block via e-mail but denied that he threatened Mr. Block. He says he regrets “having put money into this company and this space” and questions why regulators were not on top of the problem.

Lately, the U.S. Securities and Exchange Commission has stepped up its interest in reverse-merger stocks. The SEC has an active probe into foreign companies listed on American exchanges, Commissioner Luis Aguilar noted in an April 4 speech.

U.S. exchanges, too, are belatedly tightening rules on reverse mergers.

Nasdaq, for one, is now considering adopting stricter listing requirements for reverse mergers. The proposal would require such companies to be traded for at least six months on the over-the-counter market or another national exchange, as well as maintaining a minimum bid price of $4 per share on at least 30 of the last 60 trading days immediately preceding the filing for the initial listing.

A source at Nasdaq, who could not be quoted on the record about rules under consideration, said the recommendation was expected to be enacted. When asked if it was undertaken due to the scandals, the source added that “we’ve had some feedback.”

Then there is Beijing, whose policies play a crucial, albeit indirect, role in all this.

Paul Gillis, a professor of accounting who focuses on U.S.-listed Chinese companies at Peking University in Beijing, said China needed to make it easier for its firms to list on Chinese exchanges.

“It makes no sense for Chinese companies to have to go halfway around the world to get capital,” he said, adding that China was in a better place to regulate them than the SEC or the Public Company Accounting Oversight Board.

A PCAOB report on reverse mergers published in March noted there were 56 initial public offerings from China, representing 13 per cent of all IPO’s in the United States in the three years from January 2007 to March 2010. IPO’s require a greater degree of scrutiny and expense for companies to meet listing and filing requirements. They are an important source of income for such exchanges as NYSE Group and Nasdaq OMX.

As of the report date, the 159 China-region companies that gained access via reverse mergers had a combined market capitalization of $12.8-billion, less than half the $27.2-billion market capitalization of the China related IPO’s.

By the end of the research period, 59 per cent of Chinese reverse merger companies reported less than $50-million in revenues or assets as of their most recent fiscal year.

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