TORONTO, April 9, 2012 /PRNewswire/ - On June 8, 2011, Sino-Forest Corporation ("Sino-Forest" or the "Company") announced that, on that day, the Ontario Securities Commission (the "OSC" or the "Commission") publicly stated that it had commenced an investigation in relation to the Company. The investigation arose out of a "report" prepared by Muddy Waters LLC ("Muddy Waters") that was publicly disclosed on June 2, 2011.
On August 26, 2011, the Commission issued a temporary cease trade order in respect of the Company's securities and in respect of Allen Chan ("Chan"), Albert Ip ("Ip"), Alfred Hung ("Hung"), George Ho ("Ho") and Simon Yeung ("Yeung"). The temporary cease trade order was made after the Independent Committee of the Board of Directors of the Company, established in response to the allegations made by Muddy Waters, provided staff of the OSC with documents and briefings arising from the work of the Independent Committee and its advisors.
In recitals to the temporary cease trade order, the OSC said that "Sino-Forest, through its subsidiaries, appears to have engaged in significant non-arm's length transactions which may have been contrary to Ontario securities laws and the public interest", that "Sino-Forest and certain of its officers and directors appear to have misrepresented some of its revenue and/or exaggerated some of its timber holdings by providing information to the public in documents required to be filed or furnished under Ontario securities laws which may have been false or misleading in a material respect contrary to section 122 or 126.2 of the [Ontario Securities] Act and contrary to the public interest" and that "Sino-Forest and certain of its officers and directors including Chan appear to be engaging or participating in acts, practices or a course of conduct related to its securities which it and/or they know or reasonably ought to know perpetuate a fraud on any person or company contrary to section 126.1 of the Act and contrary to the public interest".
On August 28, 2011, the Company announced that Mr. Chan had voluntarily resigned as Chairman, Chief Executive Officer and Director but would continue with the Company as Founding Chairman Emeritus, a non-executive position. The Company announced that Judson Martin had, at the request of the Board, accepted an appointment as Chief Executive Officer, and that he would continue to serve as Executive Director and Vice-Chairman of the Company and as Chief Executive Officer of Greenheart Group Limited, the Company's controlled subsidiary listed on the Hong Kong Stock Exchange. The Company also announced that it had placed three employees on administrative leave, and that a fourth senior employee had been requested to act solely on the instructions of Mr. Martin. The three employees placed on administrative leave were Messrs. Hung, Ho and Yeung. Mr. Ip was the employee requested to act solely on the instructions of Mr. Martin. In making this announcement, the Company said that these actions were undertaken after certain information was uncovered during the course of the review being undertaken by the Independent Committee
The temporary cease trade order made on August 26, 2011 was later extended and continues in force. The OSC's investigation in relation to the Company continued into 2012. The Company believes that it has cooperated with staff of the Commission in connection with the investigation.
On March 30, 2012, the Company announced that Mr. Ip had resigned from the Company for health reasons but had agreed to serve as a consultant to Sino-Forest on a part-time basis.
On April 5, 2012 the Company received an "Enforcement Notice" from staff of the Commission. The Company has learned that Enforcement Notices also were received that day by Messrs. Chan, Ip, Hung, Ho and Yeung, and by David Horsley, the Company's Chief Financial Officer. Enforcement Notices typically are issued by staff of the Commission at or near the end of an investigation, identify issues that have been the subject of investigation, and advise that staff contemplate commencing formal proceedings in relation to those issues. Enforcement Notices afford recipients an opportunity to make representations before a decision is taken by staff of the Commission to commence formal proceedings.
The Enforcement Notice received by Sino-Forest alleges conduct contrary to ss. 122 and 126.1 of the Ontario Securities Act and contains allegations of a serious nature consistent with the recitals to the temporary cease trade order quoted above. The Enforcement Notice raises conduct issues in relation to the Company and in relation to the individuals who also received Enforcement Notices.
The Company is considering what steps it will take, including in relation to Company personnel, as a result of the Enforcement Notice.
As previously announced, the Company commenced proceedings under the Companies' Creditors Arrangement Act on March 30, 2012 (the "CCAA Proceedings"). All inquiries regarding the CCAA Proceedings should be directed to the Monitor, FTI Consulting Canada Inc., via email at: [email protected], or telephone: (416) 649-8094. Information about the CCAA Proceedings, including copies of all court orders and the Monitor's reports, are available at the Monitor's website http://cfcanada.fticonsulting.com/sfc.
About Sino-Forest Corporation
Sino-Forest Corporation is a leading commercial forest plantation operator in China. Its principal businesses include the ownership and management of tree plantations, the sale of standing timber and wood logs, and the complementary manufacturing of downstream engineered-wood products. Sino-Forest also holds a majority interest in Greenheart Group Limited (HKSE:00094), a Hong-Kong listed investment holding company with assets in Suriname (South America) and New Zealand and involved in sustainable harvesting, processing and sales of its logs and lumber to China and other markets around the world. Learn more at www.sinoforest.com.
No stock exchange or regulatory authority has approved or disapproved of information contained herein. This news release contains forward-looking information within the meaning of applicable securities laws. The forward looking statements expressed or implied by this news release are subject to important risks and uncertainties. When used in this news release, the words "intends", "expects", "believes", "considering" and "will" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. Forward-looking statements are based on estimates and assumptions made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that the Company believes are appropriate in the circumstances. The results or events predicted in these statements may differ materially from actual results or events and are not guarantees of future performance of Sino-Forest. Factors which could cause results or events to differ from current expectations include, among other things: the outcome of examinations currently underway by law enforcement and securities regulatory authorities; actions taken by the court, the monitor or others in the proceeding initiated by the Company under the Companies' Creditors Arrangement Act; actions taken by noteholders, other lenders, other creditors, shareholders, regulators, governmental agencies and other stakeholders to enforce their rights; the outcome of class action or other proceedings which have been or may in future be initiated against the Company; the accuracy and outcome of the results of tree asset testing undertaken by the Company; our reliance on key employees; our ability to acquire rights to additional standing timber; our ability to meet our expected plantation yields; the cyclical nature of the forest products industry and price fluctuation in and the demand and supply of logs; our reliance on the relationship with local plantation land owners and/or plantation land use rights holders, authorized intermediaries, key customers, suppliers and third party service providers; our ability to operate our production facilities on a profitable basis; changes in currency exchange rates and interest rates; the evaluation of our provision for income and related taxes; economic, political and social conditions and government policy in China, the Republic of Suriname and New Zealand, and stock market volatility; and other factors not currently viewed as material that could cause actual results to differ materially from those described in the forwarding-looking statements. For additional information with respect to certain of these and other factors, see the reports filed by Sino-Forest Corporation with applicable Canadian securities administrators. Sino-Forest Corporation disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
SOURCE Sino-Forest Corporation