XI'AN, China, May 13, 2014 /PRNewswire/ -- In an unprecedented ruling in the U.S.-listed Chinese stocks (RTOs) sector, Judge Bridget Robb Peck of the Second District Court of Nevada at a hearing on April 16, 2014 ruled in favor of all plaintiff shareholders' petitions against Sino Clean Energy, Inc. (SCEI), including their petition to place the Nevada corporation immediately into receivership. In her final Order issued on May 12, 2014, Judge Peck appointed Robert Seiden as the receiver for the Company effective immediately and, under applicable Nevada statute, Judge Peck's appointment of a receiver is not subject to appeal.
Mr. Seiden previously has been named as and has acted as a very effective receiver for a number of other U.S.-listed Chinese companies, including in the ground-breaking case of ZST Digital Technologies (ZSTN) before the Delaware Chancery Court. With respect to his new appointment as receiver for SCEI, Mr. Seiden said: "We plan to deploy an aggressive and experienced group of global professionals to help carry out this charge, including lawyers from international law firm Foley Lardner, forensic accountants and investigators from Confidential Security & Investigations (CSI), and other global financial, banking and business professionals. In addition, we intend to work cooperatively with U.S. and Chinese government agencies as we have in our past successful receiverships."
Judge Peck's ruling in the SCEI case in Nevada came under chapter NRS 78.650 which states in part:
NRS 78.650 Stockholders' application for injunction and appointment of receiver when corporation mismanaged.
- Any holder or holders of one-tenth of the issued and outstanding stock may apply to the district court in the county in which the corporation has its principal place of business or, if the principal place of business is not located in this State, to the district court in the county in which the corporation's registered office is located, for an order dissolving the corporation and appointing a receiver to wind up its affairs, and by injunction restrain the corporation from exercising any of its powers or doing business whatsoever, except by and through a receiver appointed by the court, whenever:
(a) The corporation has willfully violated its charter;
(b) Its trustees or directors have been guilty of fraud or collusion or gross mismanagement in the conduct or control of its affairs;
(c) Its trustees or directors have been guilty of misfeasance, malfeasance or nonfeasance;
All interested parties may request Judge Peck's final Order by contacting Department 13, Janet Taylor, Legal Assistant to The Honorable Bridget Robb Peck, (775) 325-6732.
SCEI last filed quarterly financials with the SEC in May, 2012. On August 4, 2013, a Form 13D was filed with the SEC by a Group of SCEI shareholders holding more than 5% ownership of SCEI based on its last common share count reported with the SEC. The Group joined together in a binding Voting Agreement with the intent to engage in communication with the Board of Directors and Management in order to facilitate a resumption of regular quarterly financial and operational performance reporting with the SEC and the investment community following the final settlement taking effect on July 10, 2013 for the outstanding consolidated shareholders class action lawsuit. Despite repeated attempts in detailed letters to the Board of Directors and Management, the 13D Group was unable to achieve an effective dialogue with the Company. Accordingly, the 13D Group on October 22, 2013 joined with another group of shareholders in filing a lawsuit petitioning the Company under Chapter NRS 78.345 which states:
NRS 78.345 Election of directors by order of court upon failure of regular election.
- If any corporation fails to elect directors within 18 months after the last election of directors required by NRS 78.330, the district court has jurisdiction in equity, upon application of any one or more stockholders holding stock entitling them to exercise at least 15 percent of the voting power, to order the election of directors in the manner required by NRS 78.330.
- The application must be made by petition filed in the county where the principal office of the corporation is located or, if the principal office is not located in this State, in the county in which the corporation's registered office is located, and must be brought on behalf of all stockholders desiring to be joined therein. Such notice must be given to the corporation and the stockholders as the court may direct.
- The directors elected pursuant to this section have the same rights, powers and duties and the same tenure of office as directors elected by the stockholders at the annual meeting held at the time prescribed therefore, next before the date of the election pursuant to this section, would have had.
The Company failed to respond to this petition and was found in default under Chapter NRS 78.345 by the Court in Clarke County (Las Vegas), Nevada on December 17, 2013. Shortly thereafter, the Shareholders Group filed the petition with the Second District Court in Washoe County (Reno), Nevada to place the Company into receivership under NRS 78.650.
Regarding Judge Peck's Order, Jim Sutter, the leader of the Nevada legal actions on behalf of the SCEI Shareholders stated, "This is not the first Chinese RTO that has been placed into receivership. There are prior precedent-setting cases in which the Delaware Chancery Court ruled to place a Chinese RTO into receivership. However, this is the first known ruling in Nevada to put a Chinese RTO into receivership. The previous rulings in Delaware are based on individual shareholders who petitioned the Delaware Court of Chancery to open the Company's books and records and in which the defendant Company ignored the petition. The Delaware Chancery Court's rulings ordered the Receiver to act on behalf of the Court-awarded 'put' option for the benefit only of the individual shareholder plaintiff in each case. By contrast, the Nevada Court Order by Judge Peck differs considerably, as it charges the receiver Mr. Seiden under applicable Nevada statute to maximize the value of SCEI on behalf of all the shareholders. The SCEI Shareholders Group views Judge Peck's Order to be a major precedent, as it sends a message to all Chinese RTO companies registered in Nevada that there can be severe legal consequences from a strategy to 'go dark' by discontinuing regular required reporting of Annual and Periodic Reports with the SEC and the holding of required regular Shareholders Meetings and Elections of Directors."
Alain Peracca, the elected leader by executed Voting Agreement of the Schedule 13D filing Group of SCEI Shareholders commented: "The purpose of the formation of our 13D Group was to try to work collaboratively with existing management and the Board of Directors in order for the Company to resume regular required financial and operational reporting to the SEC, all shareholders, and the investment community at large and to achieve material improvements in SCEI's corporate governance. With the favorable ruling by Judge Peck in Nevada on all of our petitions including to appoint Mr. Seiden as receiver, we are optimistic that we will be able to take strong steps in the months ahead to maximize the value of SCEI on behalf of all Shareholders. With SCEI's share price recently trading at about $0.15, or less than 3% of the Company's last reported audited book value for 2011, we are very optimistic about the likelihood of Mr. Seiden's efforts as receiver to produce value on behalf of all SCEI shareholders that could be multiples of the recent share price. We will continue to monitor and evaluate the situation and we look forward to working with Mr. Seiden to act in the best interest of all SCEI shareholders in his capacity as newly-appointed receiver."
SCEI.OB: OTC MARKETS
SOURCE Alain Peracca