Sino-Forest aka Tre-X or the biggest fraud?

[Hugh Conway]

The biggest financial fraud in history? It's got it all - smug Canadians getting their comeuppance, smugPE getting their comeuppance, smug cc.com'ers laughing

Sino Forest: Is This the Biggest Theft in History?

Jun. 20 2011 - 6:57 am | 2,767 views | 0 recommendations | 3 comments

Things are looking bad for Sino Forest as Canada’s Globe and Mail releases the results of their investigation.

 

As Christopher Failles pointed out on these pages a couple of weeks back, Sino Forest was a very risky stock to be holding. At the first sniff of accounting regularities it’s worth getting out of a position: for they always (OK, more often than not) seem to lead to the uncovering of yet more such probelms, not a simple resolution.

 

Canada’s Globe and Mail newspaper has been doing some hard looking at what Sino Forest themselves say they have as timber holdings. And they don’t seem to be able to find what is claimed. They concentrated on Yunnan Province where Sino Forest claims to have purchased 200,000 heactares of standing timber from one specific company.

 

That company claims that they sold only 200,000 mu of timber, not hectares. And a mu is about one fifteenth of a hectare, meaning that if true, we seem to be missing some 93% of the timber that should be there.

 

Right number, wrong unit if you like.

 

John Hempton ( a hedge fund manager with a great interest in such Chinese stocks) has had a go at working out, if Sino Forest is indeed a scam, quite how much money has been taken.

 

There was a billion dollars raised in bonds and equity investments, insiders sold perhaps another billion dollars worth of stock meaning that:

 

Bernie Madoff took money from Peter to pay Paul. The amount of money stolen for Bernie Madoff’s personal use was probably less than $300 million. Sino Forest is six times bigger and if the Muddy Waters allegations are correct is probably the largest straight theft in human history.

 

It does all depend upon whether those forests exist and whether they’re owned by Sino Forest, this is still true. But if they don’t or aren’t then Hempton may well be right.

[G-spotter]

Always thought it was a scam since you can`t log most of the forests in China anyway.

 

China’s National Logging Ban was issued in 1998 because of the degraded and deteriorated forests that had resulted from unsuitable and unsustainable management strategies and methodologies. However, many more conflicts between government and local communities have emerged under the conventional approaches. Currently, the local communities in China still have their own approaches to forest management using indigenous technology knowledge (ITK).