Newspaper article The Canadian Press

Embattled Sino-Forest Faces More Uncertainty as OSC Alleges Fraud: Sino-Forest Faces OSC Fraud Allegations

Newspaper article The Canadian Press

Embattled Sino-Forest Faces More Uncertainty as OSC Alleges Fraud: Sino-Forest Faces OSC Fraud Allegations

Article excerpt

TORONTO - Sino-Forest Corp. is in for a long road of uncertainty ahead as the once top-rated forestry company, now struggling to find a buyer, faces fraud allegations by the Ontario Securities Commission.

The firm, which the OSC accuses of misrepresenting its revenue and the extent of its assets in China, has been exploring its options, which might include a sale of the company.

However, the process could be hindered by confusion over which Chinese assets Sino-Forest owns, a question at the heart of the OSC fraud allegations announced Monday and a dilemma that seems just as murky as it did months ago when the accusations first emerged.

"The big question is what assets do they own, and how much are they worth," said Richard Powers, a professor of business law at the University of Toronto.

"Until they can determine that, it's going to be nearly impossible to find a potential buyer."

It's still uncertain just how deeply Sino-Forest is involved in the alleged fraud that has plagued the company's reputation. None of the allegations against it have been proven in court.

On Monday, Sino-Forest did not disclose details of the OSC's allegations, though it did say that they were of "a serious nature consistent with the recitals to the temporary cease trade order" made last August.

The notice, which was received by the company last week, said "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" amongst other allegations.

Sino-Forest said orders were also sent to company founder and former chief executive Allen Chan, as well as other former executives Albert Ip, Alfred Hung, George Ho and Simon Yeung. Its current chief financial officer, David Horsley, was also sent an OSC notice.

"The company is considering what steps it will take, including in relation to company personnel, as a result of the enforcement notice," Sino-Forest said.

Enforcement notices from the OSC allow Sino-Forest and individuals associated with the Chinese forestry company an opportunity to respond to the allegations against them before they're made public.

Powers said if Sino-Forest's assets continue to be undefined, then there are "other scenarios where they restructure and try to make a deal with the creditors themselves so they won't be sold. …

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