HONG KONG, June 20 (Reuters) - China&${esc.hash}39;s more than two decades of corporate history is riddled with hiccups ranging from accounting scandals and management mishaps to outright fraud at overseas-listed companies despite government efforts to crack down on market corruption.
In early 2000s, accounting irregularities were so widespread in China that then Chinese Premier Zhu Rongji called it a "malignant tumour" that threatened China&${esc.hash}39;s economy.
Accounting frauds and financial scandals are not limited to Chinese corporates. It has been a big problem in the United States, analysts say, citing Enron, WorldCom and the role played by Wall Street banks in the latest global financial crisis and the Internet bubble in 2000s.
Although investment in overseas-listed Chinese companies has yielded handsome returns for many investors in the past 10 years, accounting horror stories and financial scandals in recent months have cast a pall over a number of U.S.-listed Chinese companies, many of which entered U.S. exchanges via reverse takeovers, spooking investors drawn to Chinese stocks by promises of heady profit growth.
In the latest episode, shares of U.S.-listed Harbin Electric Inc collapsed on Thursday as a report from a short-seller led investors to bail out of the Chinese maker of electric motors rather than wait to see if a proposed takeover bid would come to fruition. Harbin said on Friday the report was "factually incorrect".
Investors have rushed for the exits, even from companies such as Renren Inc , China&${esc.hash}39;s Facebook equivalent, which was a hot investment in its initial public offering a month ago. It is down about 60 percent from its first-day close.
The following are some of the most high-profile fraud cases in recent years involving Chinese companies listed in Hong Kong, mainland China and Singapore.
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2011 - Hong Kong-listed Real Gold Mining Ltd , an Inner Mongolian company, halted trading in its shares on May 27 after a newspaper report said the miner had filed one set of accounts with the Hong Kong stock exchange and a much different one with China&${esc.hash}39;s central government. The stock has been suspended from trading since.
2011 - Hong Kong&${esc.hash}39;s securities regulator was seeking to freeze the assets of the chief executive of China Forestry Holdings Co Ltd , which was being investigated for accounting irregularities, a court document showed in February. The Securities and Futures Commission has applied to the high court to freeze up to HK${esc.dollar}398 million (${esc.dollar}51 million) in assets belonging to Chief Executive Li Han Chun, according to a court statement obtained by Reuters. China Forestry shares have been suspended since Jan. 26 after auditors KPMG found possible irregularities during their audit for fiscal 2010, the company said in a filing to the Hong Kong stock exchange in late January.
2010 - Chinese textile firm Hontex International Holdings Co Ltd was listed in December 2009 and just three months later, its shares were suspended after the SFC alleged that its IPO prospectus had "materially overstated" its financial position. The SFC has successfully managed to freeze assets equivalent to the sum Hontex raised in its IPO. Investors have yet to see their money returned, with a debate continuing in the courts about the methods the SFC is using to reclaim the money.
2010 - Shenzhen-listed Yunnan Green Land Biological Technology Co Ltd and its management were reprimanded by the Shenzhen bourse for seriously overstating profit in 2010 and 2009, according to the Shenzhen stock exchange.
2010 - Huang Guangyu, China&${esc.hash}39;s one-time richest man and the founder of retail chain GOME Electrical Appliances Holding Ltd , was found guilty in May of bribery, insider trading and illegal business dealings. He was sentenced to 14 years in jail.
2006 - Chinese appliance maker Guangdong Kelon Electrical Holdings Co Ltd and a number of former executives were fined for fraudulent accounting and other improper behavior. The company said it was found to have inflated revenue by 1.2 billion yuan and its profit by 120.42 million yuan between 2002 and 2004. Former chairman Gu Chujun was sentenced to 10 years in prison for embezzlement and accounting fraud.
2004 - Singapore-listed jet fuel trader China Aviation Oil (CAO) stunned markets with a ${esc.dollar}550 million trading loss when it took risky bets on oil derivatives, triggering Singapore&${esc.hash}39;s biggest corporate scandal since the collapse of Barings Bank in 1995. A Singapore court later sentenced the man at the centre of the scandal -- former CAO Chief Executive Chen Jiulin -- to more than four years in jail.
2004 - Stephen Wong, chairman and an executive director of China&${esc.hash}39;s third-largest television maker, Hong Kong-listed Skyworth Digital Holdings Ltd (0751.HK), was charged by Hong Kong&${esc.hash}39;s anti-corruption watchdog with allegedly misappropriating more than ${esc.dollar}6 million in company funds. Wong was later sentenced to six years in jail for plundering company funds and share option fraud.
2003 - Zhou Zhengyi, then China&${esc.hash}39;s 11th richest man controlling two Hong Kong-listed companies, was detained in 2003 after an investigation into 2 billion yuan in loans obtained from the country&${esc.hash}39;s primary forex lender, Bank of China Ltd . Insiders said senior Shanghai government officials, including the city&${esc.hash}39;s then-Communist Party boss Chen Liangyu, had been instrumental in helping Zhou win approval for crucial city projects that were later implicated in the scandal. In 2008, a Shanghai court upheld a 16-year jail sentence handed down to Zhou. He was found guilty of five charges including misappropriation of funds, bribery and forging VAT receipts. The scandal had weighed on China&${esc.hash}39;s financial markets and sparked a rash of arrests as probes into Zhou&${esc.hash}39;s links with the Shanghai government and his lenders widened. Chen Liangyu was sentenced to 18 years in jail in 2008 for taking bribes and abuse of power.
2003 - Chinese orchid tycoon Yang Bin was sentenced to an 18-year jail term for commercial crimes, including contract fraud, forging financial instruments, bribery and illegally occupying and using farmland. Yang was once ranked as China&${esc.hash}39;s second-richest man with an estimated fortune of ${esc.dollar}900 million. His company Euro-Asia Agricultural (Holdings) Co Ltd was delisted from the Hong Kong stock exchange in 2004.
2002 - A Chinese court doled out suspended jail terms for ex-senior executives of Chinese retailer Zhengzhou Baiwen Co Ltd for false accounting practices. The then Shanghai-listed retailer reported combined losses of more than 1.5 billion yuan between 1998 and 2000.
2001 - Chinese regulators discovered Sanjiu Enterprise Group, a major Chinese drug maker, and its affiliates had misappropriated more than ${esc.dollar}300 million in Shenzhen-listed Sanjiu Medical and Pharmaceutical Co Ltd.
2001 - China Securities Regulatory Commission unearthed non-existent profits at Chinese biomedical company Guangxia (Yinchuan) Industry Co of 178 million yuan in 1999 and 567 million yuan in 2000. The company had been widely touted as a bluechip. China&${esc.hash}39;s Finance Ministry later revoked the licence of an accounting firm for signing off on fraudulent earnings issued by Guangxia.
2001 - Hubei Lantian Co, a producer of fish and the delicacy lotus root, apologised to investors in a public announcement and said 10 officials had been questioned in an investigation into whether the company had provided false financial information. Sources: Reuters (Reporting by Charlie Zhu; Editing by Chris Lewis and Muralikumar Anantharaman)
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