Audit says no proof China Public Procurement deals ever took place
There is no evidence that hundreds of billions of dollars of transactions supposedly conducted by China Public Procurement (CPP) were bona fide, according to an audit by PricewaterhouseCoopers (PwC).
"In the Forensic Review, PwC was unable to find any documentation to substantiate any of the agreements had any commercial substance. It was stated in the Forensic Review that none of the agreements eventually turned into actual procurement transactions," said CPP's announcement to the Hong Kong stock exchange last night.
For example, in February 2010, CPP said it had entered into a three-year agreement to provide procurement services for railway equipment worth at least 300 billion yuan (HK$369.46 billion) to Hua Tie, a subsidiary of China Railway Construction Materials Group (CRCMG), an affiliate of the Ministry of Railways.
The accounting firm was unable to obtain evidence that Hua Tie ever existed or was a subsidiary of CRCMG.
"Hua Tie's actual existence is highly questionable as no such company record was found in the Administration For Industry and Commerce; Hua Tie could not be located on PwC's visits to its addresses; and no profile of Hua Tie could be identified on the internet," said CPP. "Further, the representative of Hua Tie as stated on the Hua Tie agreement claimed he was never part of Hua Tie and denied the execution of such agreement took place."
In February 2010, CPP said it had entered into an agreement to provide procurement services for 60 billion yuan of equipment and material for the Economics and Trading Bureau of the Economic Development Zone of Liaocheng city, Shandong province (Shandong Liaocheng).
"PwC was unable to obtain evidence to suggest the Shandong Liaocheng agreement has any commercial substance," said CPP.
Similarly, PwC found no proof of CPP's three billion yuan procurement agreement with Asia Water Resources, or its 4.2 billion yuan coal supply agreement.
CPP tasked PwC with the forensic review in April. CPP's shares have been suspended since July 5, 2010 in reaction to a mainland report questioning the authenticity of 304.2 billion yuan worth of deals.