Sino Techfibre

[Nick]

I think it must be very brave to continue investing in small cap S Chips in light of the poor corporate governance. I wonder will the proposed SGX rules help to mitigate this ?

[Musicwhiz]

I think it must be very brave to continue investing in small cap S Chips in light of the poor corporate governance. I wonder will the proposed SGX rules help to mitigate this ?

The rules are supposed to be enforced by end-May 2011 right? Apparently, an article I posted in another thead on S-Chips mentioned that it's tough to police the China counterparts and ensure things are in order + above board.

Hence, I do not think this problem is one which will go away anytime soon!

[yeokiwi]

E&Y is good!
I think it should be given an award.
I think all those companies that have dubious accounting practices and virtual cash will be quite hesitant to use E&Y.

Must look out for those stocks that are endorsed by E&Y!

[Musicwhiz]

Apr 21, 2011
NEWS analYSIS
Sino Techfibre's tardy disclosure sparks concern
It is criticised for delay in revealing accounting scam, lack of safeguards in financial housekeeping
By Goh Eng Yeow, Senior Correspondent

CONCERNS have been raised over the manner in which Singapore-listed synthetic leather maker Sino Techfibre handled the discovery of discrepancies in its sales invoices last week.

Market watchers are especially upset that the China-based company had made the announcement right in the thick of the annual report season, as companies are preparing for their annual shareholder meetings.

They believe the firm has been tardy, to say the least, in bringing these matters to light.

Under the listing rules of the Singapore Exchange (SGX), a company must conduct its annual general meeting (AGM) for shareholders within four months of the end of its financial year.

It must also furnish shareholders with a copy of its annual report at least 14 days before the date it fixes for its AGM.

Sino Techfibre, whose financial year ended on Dec 31 last year, should have sent out its annual report by the middle of this month, in order to comply with SGX rules.

If the firm had been facing any difficulties with its audit, it should have applied to the SGX well ahead of the deadline for an extension of time in which to issue its annual report.

Instead, nothing at all was heard from the firm between the release of its unaudited full-year results on Feb 15 and the statement it issued on April 14 flagging the accounting irregularities.

As it turned out, April 14 was only a few days before the deadline for Sino Techfibre to issue its annual report.

Going by the April 14 statement, the company should have been well aware of the problems encountered by its auditors much earlier - long before the deadline to issue its annual report.

In the statement signed by chief executive officer Li Wenheng, Sino Techfibre said one of the sales managers it approached for an explanation of invoice discrepancies had gone missing.

It added that 'towards the end of March and early April, visits to the sales manager's home and telephone calls proved unsuccessful'.

The firm had also made a police report in China to locate the sales manager.

That raises another issue - the checks and balances which should have been in place at Sino Techfibre to stop any accounting scam taking place.

One company director noted that in any company, there should be a segregation of duties when it comes to handling delivery orders, sales invoices and payments.

'In order to take the goods out of the warehouse, a delivery order must be raised when an order has been received from the customer. The delivery is then followed by a sales invoice and then by collection in payment,' he said.

For good housekeeping, these functions should have been handled by different employees, given the risks that might arise if the roles overlap.

Until now, the information available from Sino Techfibre has been rather sketchy.

The company has disclosed only that it had asked Ernst & Young to conduct a 'full and complete verification exercise of all the invoices issued by the company to identify the extent of the discrepancies'.

Sino Techfibre was once a high-flying market darling with a promising future, counting China's People's Liberation Army and Ministry of Public Security among its customers.

In July 2007, it had hit a market value of $1.6 billion nine months after raising $113 million from its initial public offering here.

It is such a pity then, that despite hobnobbing with mainland law enforcers, the company should be embroiled in an accounting scam.

engyeow@sph.com.sg

[Musicwhiz]

To add insult to injury, Sino Techfibre announced yesterday that a fire had broken out and destroyed financial records in one part of its office, while leaving staff unharmed. The cause of this "fire" is unknown.

How very convenient for this to occur just during its investigation into alleged fraud!

http://info.sgx.com/webcoranncatth.nsf/V...900509C58/$file/Sino_Techfibre_Announcement_210411.pdf?openelement

[lonewolf]

The S-Chips scandal saga is playing out like a movie. The stink of this 'fire' is so bad I can even smell it in my house even though the fire happened thousands of miles away.

A reasonable person have to consider that both events are related somehow. Proofing it is another matter altogether.

Someone should take all these scandals and turned it into a script for a movie. I think it will be a local blockbuster!

[Jacmar]

There is an article in this week's Edge magazine worth reading on china chips. watch out to those people who own china green shares in HK. potential accounting irregularities discovered and some funds is shorting big time.i heard that the owner of china green is the brother of 1 s-chip...not sure.

[d.o.g.]

i heard that the owner of china green is the brother of 1 s-chip...not sure.

The owner of China Green is Sun Shaofeng. He is the brother of Sun Jiangrong, the owner of Sino-Environment. Sun Jiangrong was in the news in 2008-2009 when he defaulted on a loan from hedge fund Stark Investments.

The loan was pledged against Sun Jiangrong's shares in Sino-Environment plus shares in Top One International. When Sun Jiangrong defaulted, Stark seized and sold off his entire 56% stake in Sino-Environment, then went after the Top One International shares also. Stark found that Top One International's main asset, Chongqing Dading Property Group, had been transferred to Top One Property Group. Top One Property in turn tried to transfer the Chongqing Dading shares to a firm owned by Sun Shaofeng.

There was an article by Lynette Khoo in the Business Times dated 16 Nov 2009 that outlines some of the details in this saga.

[Jon-san]

Wow. Enough drama there to make a movie. Geez... That's really scary to read. Puts me off S-chips completely.

[Musicwhiz]

Business Times - 25 Apr 2011

Fire at Sino Techfibre factory destroys records

Blaze in Shandong facility may further obscure ongoing probe into its books

By WINSTON CHAI

A FIRE at the China factory of mainboard-listed Sino Techfibre could further obscure an ongoing probe into its books as key financial records have reportedly been destroyed in the incident.

According to a statement released by the firm late Friday night, a fire had broken out at the administrative premises within its primary production facility at Longkou City in Shandong province in the early morning of April 20.

While the blaze did not cause any deaths or injuries, the financial records that were kept in the affected office have been destroyed, Sino Techfibre revealed.

'The company has reported the incident to the local police, and the latter has commenced the necessary investigations,' it said.

'The cause of the fire and actual extent of the damage are currently still unknown, pending the completion of the police investigations into the fire and issuance of their report,' it added.

The incident happened a week after the firm was red-flagged by external auditors Ernst & Young (E&Y) for accounting irregularities, adding to recent scandals surrounding the bookkeeping practices of several other China-linked companies.

Specifically, E&Y uncovered some discrepancies in the invoices issued by the firm and its suppliers.

Sino Techfibre said that it could not locate the sales manager who is at centre of this controversy, and has since lodged a local police report.

As E&Y did not obtain a satisfactory explanation on the issue, it could not complete and issue the audit report on Sino Techfibre.

In an update last Friday, the Chinese maker of polyurethane (PU) and microfibre synthetic leather products also announced that it has appointed an interim chairman and CEO following E&Y's findings.

Sino Techfibre's existing CEO Li Wenheng has been 're-designated as an executive director' until further notice, the firm said.

Independent director Tay Wee Kwang has taken over as Sino Techfibre's interim chief while Lee Wing Hang, another independent director, has been appointed as its interim chairman.

As part of his responsibilities, Mr Tay will oversee the independent investigations into the company's audit issues as well as review the investigation report on last week's fire. He will also take over the company seals of Sino Techfibre and all its subsidiaries.

Sino Techfibre is currently finalising the appointment of E&Y for an expanded audit.

In anticipation of this move, Sino Techfibre said that it has been 'making the necessary preparatory work in respect of the relevant books and financial records of the company' prior to last Wednesday's blaze.

The counter has been suspended from trading since April 19.