China Forestry Holdings Co. (930), the Chinese timber company whose shares have been suspended since January last year because of accounting irregularities, said its acting chief executive officer has resigned and losses deepened as it struggled to rebuild its business relationships.
Acting CEO Li Jian resigned effective from April 15, according to statement today from the Beijing-based company. Chairman Li Kwok Cheong will be China Forestry’s acting CEO before the company finds a replacement. No reason for the departure was given.
“Last year, the company experienced difficulties in resuming its business operations as more effort was put into the investigations,” Chairman Li said in a separate statement to the Hong Kong stock exchange. “As a result, the recovery of our business was slower than expected and harvesting and trading business were limited in 2011.”
China Forestry, partly owned by private equity firm Carlyle Group, had to replace KPMG LLC in January after the auditor resigned, saying the company needs to verify ownership and valuation of assets. At least six disputes have broken out this year between auditors and Chinese companies listed in Hong Kong, spurring distrust among investors about corporate governance.
China Forestry’s loss for last year was 4.19 billion yuan ($664 million), compared with loss of 2.71 billion yuan in 2010, according to the stock exchange statement. Sales fell 63 percent to 392.3 million yuan.
Detained By Police
China Forestry’s former chief executive officer, Li Han Chun, was detained by police in Guizhou province in February, 2011, for alleged embezzlement of 30 million yuan, the company said. Li and his personal company are guilty of insider dealing when they sold 119 million shares of China Forestry through a share placement, Hong Kong’s securities regulator said March 2011.
The company formed a committee of independent directors in January 2011 to conduct an inquiry after KPMG identified irregularities. It said last April the bank statements given to KPMG by the former management team were falsified and some logging permits were fake. China Forestry hired Crowe Horwath HK CPA Ltd. as its auditor in January.
Four Hong Kong-listed Chinese firms, including Boshiwa International Holding Ltd. (1698), a Shanghai-based Harry Potter apparel licensee, said their auditors resigned this year because of disputes over financial data or other key information. Two companies said their auditors needed more time to verify earnings.
Hong Kong’s Financial Reporting Council announced April 11 that it had identified 13 Chinese companies in need of close monitoring. The agency, which investigates auditing and reporting irregularities of public traded companies, declined to name them.
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