Sino-Forest Corporation, the Chinese forestry company under investigation by Canadian securities regulators, is relying on Brunswick Group in New York and China for PR support as it works to refute a scathing analyst’s report and satisfy concerns about its financials.
After an analyst from Muddy Waters Research accused the company in June of “aggressively committing fraud,” trading of its shares was halted on the Toronto Stock Exchange pending an investigation as the report questioned its claimed forest reserves and revenues. Sino-Forest released the findings of an independent report on Nov. 15 which it says verifies assets and revenues called into question. “We can categorically say Sino-Forest is not the ‘near total fraud’ and ‘Ponzi scheme’ as alleged by Muddy Waters,” said CEO Judson Martin.
In the Muddy Waters report, which preceded a significant drop and suspension of trading in S-F shares as well as the resignation of its CFO, short-selling analyst Carson Block wrote: “As Bernard Madoff reminds us, when an established institution commits fraud, the fraud can become stratospheric in size. Sino-Forest Corp. is such an established institution fraud, becoming massive due to its early start, luck and deft navigation.”
In a statement following Sino-Forest’s release of the independent report’s findings on Tuesday, Block said the “release has no credibility.”
Brunswick partner Stanislas Neve in New York and Tim Payne in Hong Kong handle Sino-Forest.
The Wall Street Journal said S-F “came out fighting” with the release of the report this week, fighting both the charges against the company and a “wave of accusations against Chinese companies by short-sellers.”
The New York Times noted the independent report was unable to verify some company data and statements at the heart of the case.
The Ontario Securities Commission has not commented on its investigation.