Fugitive CEO arrested in Guizhou
China Forestry Holdings says its former chief executive, Li Hanchun, was arrested last week in Guizhou province for allegedly embezzling 30 million yuan (HK$35.5 million).
The company said several unnamed China Forestry executives suspected of being linked with Li's case had also been dismissed. China Forestry, one of China's largest logging firms, has recently moved to examine its assets and protect them.
Li was dismissed as CEO on February 14, and arrested 10 days later on February 24.
Kunming Ultra Big's acquisition of the forestry rights was financed by the 1.22 billion yuan of net proceeds from China Forestry's listing on the Hong Kong Stock Exchange main board in December 2009. The IPO boasted a star-studded cast of Wall Street and City of London luminaries as advisers and investors. US private equity firm Carlyle Group owns 11 per cent of China Forestry.
In February, the Securities and Futures Commission sued Li Hanchun to freeze the proceeds from a share sale he made. Court of First Instance Judge Carlye Chu Fun-ling extended a freeze on HK$398.2 million of Li's assets until March 4.
On January 12, Li sold 119 million China Forestry shares for HK$399 million, reducing his stake from 6.61 per cent to 2.72 per cent. China Forestry announced on January 31 that its auditor, KPMG, had found possible irregularities in its 2010 results.
SWS Research said China Forestry's announcement of possible irregularities in its 2010 results was 'worse than we had expected,' and downgraded the stock to neutral.
'We were previously told the announcement would just explain the company's revenue recognition,' SWS said. 'However, the board admits (that) fraud has been uncovered, indicating the situation is more severe than we previously thought.'
The company's shares have been suspended since January 26.