China Solar Energy Says Directors Detained Amid Fraud Probe

October 19, 2013 by  
Filed under Green Energy News

China Solar Energy Holdings Ltd. (155), a
Hong Kong-based solar panel maker, said its chairman and two
directors have been detained by Chinese authorities on
allegations of fraud involving the assets of a mainland unit.

Chairman Yeung Ngo, Yang Yuchun and non-executive director
Hao Guojun were arrested and have been held since Aug. 26,
according to the company’s legal advisers, and can’t be
contacted, China Solar Energy said in a statement to the Hong
Kong stock exchange on Oct. 18. The company is still trying to
assess the impact of the investigation on its financial
performance and its shares, which were halted on Aug. 16, will
remain suspended, it said.

The disappearance of China Solar Energy’s directors and the
fraud probe underscore investor concerns that the business
environment on the mainland lacks transparency and is prone to
corruption. Transparency International last week ranked Chinese
firms lowest in a survey of public reporting practices in
emerging markets, while short-sellers have targeted companies
including Prince Frog International Holdings Ltd. (1259) and China
Minzhong Food Corp.

“Chinese companies have been seen as having relatively
weak corporate governance. This is the reason why valuations of
Chinese stocks are lower,” Lewis Wan, Hong Kong-based chief
investment officer at Pride Investments Group Ltd., said by
phone yesterday. “The penalty on the mainland isn’t harsh
enough to stop executives from committing frauds. The situation
should improve though as China Securities Regulatory Commission
has been keen to clear frauds in the nation.”

China Solar Energy fell 11 percent to HK$0.18 on Aug. 16
before the company asked for the shares to be suspended pending
the release of an announcement about recent movement in the
price. The company’s market value was HK$277 million ($36

Domestic Demand

The government in China, the world’s biggest maker of solar
panels, announced measures in June to boost domestic demand for
solar-generated electricity and provide easier financing to
manufacturers to help ease a glut that’s made the industry
unprofitable. The State Council also said it will encourage
mergers and acquisitions and curb blind expansion in the sector.

Yeung Ngo, whose age was given as 62 in the annual report
and accounts released July 30, joined the company in March 2011
and is the father of Yang Yuchun, according to the report.
Yeung’s stake in the company fell to 14.6 percent in August from
15.8 percent after the company raised about HK$20.2 million in a
private placement, according to an Aug. 13 filing.

Duties Suspended

Hao Guojun, whose age was given as 55, became a non-executive director in January 2013 and joined a unit named as
Dali Stream Solar Energy in 2008 as assistant chief engineer,
according to his biography in the annual report.

The directors’ duties and functions have been suspended,
although that won’t affect daily operations, China Solar Energy
said in its statement. Two calls to the company’s offices in
Hong Kong yesterday outside normal business hours were not

Based on investigations into allegations made to the Hong
Kong stock exchange against the company, one subsidiary in
Changzhou had failed to pay a reported increase in its
registered capital with the local authority by the due date,
according to the statement.

The Dali Stream Solar unit, had failed to pay up its
registered capital of $49.5 million, according to the statement.
Its assets were frozen and documents were seized by the Dali
public security bureau as part of a probe into a suspected false
reporting of registered capital involving Yeung and Yang, the
company said.

Lowest Ranking

Both units risk having their business licenses revoked,
according to the statement.

In Transparency International’s report of 100
multinationals released Oct. 17, the 33 Chinese companies
surveyed averaged a score of 2 out of 10 points. Eight of the 10
lowest ranking companies on the list were Chinese, including
China National Chemical Corp. and China Shipbuilding Industry

Short-seller Glaucus Research Group has targeted Chinese
companies this year, most recently Fujian province-based Prince
Frog, a seller of adult care products and children’s care
products including diapers. Trading in the shares was halted in
Hong Kong on Oct. 16 after they plunged the most since listing
in July 2011 after Glaucus questioned the company’s sales.

The short-seller, which has an office in Newport Beach,
California, also targeted Minzhong Food, based in Putian, Fujian
. The Singapore-listed stock lost half its market value
in less than two hours on Aug. 26 after Glaucus questioned the
vegetable processor’s accounts. PT Indofood Sukses Makmur
offered to buy the outstanding shares in the company it didn’t
already own the following month.

To contact the reporter on this story:
Stephanie Tong in Hong Kong at

To contact the editor responsible for this story:
Stanley James at

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