TORONTO – Following allegations of fraud by a stock analyst, Toronto-based Sino-Forest Corp. (TSX: TRE), a commercial forest plantation operator vertically integrated wood products manufacturer, says it has retained PriceWaterhouseCoopers to assist an internal committee in dealing with an investigation by a Canadian stock trading regulatory authority.
A June 2 report by Muddy Waters LLC described Sino-Forest as a "Ponzi scheme" and said the company had failed to deliver dividends after collecting billions in investments. Sino-Forest's stock, which trades on the Toronto exchange, plummeted in value following the report and the announcement of an investigation by the Ontario Security Commission, a provincial body similar to the SEC in the U.S.
Muddy Waters said June 2 that it recommended that investors sell Sino-Forest Corp. stock, and decrying, "its convulted [sic] structure whereby it runs most of its revenues through 'authorized intermediaries' (“AI”). AIs supposedly process TRE’s tax payments, which ensures that TRE leaves its auditors far less of a paper trail. On the other side of its books, TRE massively exaggerates its assets. We present smoking gun evidence that TRE overstated its Yunnan timber investments by approximately $900 million."
Sino-Forest, which acknowledged the securities commission investigation, said in a statement, "PwC is highly familiar with the forestry industry and the business environment in China. PwC has extensive resources in North America and China, and will commence its work immediately."
Sino-Forest operates plantation forests and manufacturers engineered flooring through various holdings. It announced last week that it had acquired 266,000 acres of plantation forests of pine, cedar, fir, birch and spruce.
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