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Toh Han Shih

Regulator gives details of theft of documents as it denies claims by ex-chairman that probe was improper

The China Regulatory Securities Commission  has revealed more details of how employees at Guangdong Kelon Electrical Holdings obstructed the watchdog's investigation of the Hong Kong and Shenzhen-listed firm and inflated revenue.

The CSRC again rejected allegations by former Kelon chairman Gu Chujun that it had used improper means to investigate the company, one of China's largest producers of refrigerators and air-conditioners.

Gu, who is on trial in a mainland court, was reported to have had his relatives disseminate a report that was critical of the CSRC investigation.

CSRC said that when it was investigating Kelon from October 2004 to 2005, it initially encountered difficulties from Kelon staff, who it said were not cooperative.

On the morning of May 25, 2005, CSRC's investigators, accompanied by Kelon staff, were examining some company documents.

'Right in front of our investigators, some Kelon employees grabbed a swathe of documents and ran for the office door. Our investigators managed to block them and retain the documents.'

The CSRC statement went on: 'At  noon that day, while our investigators were resting, some Kelon staff took documents from Kelon's finance department, put it on a farming truck and drove off. Our investigators reported this to the police.

'That night and the following day, our investigators, with the help of police and local officials, managed to retrieve 15 trunks of documents from various parts of Kelon's premises.'

After examining Kelon documents, CSRC found evidence of fake records of sales, inventory and returned goods since 2002, said the watchdog.

'Some Kelon staff admitted these documents were falsified,' it said.

CSRC rejected claims made in Gu's report that Kelon's sales figures were not faked, but reflected inventory and returned goods that were part of normal sales operations.

CSRC cited an example in 2004, when Kelon recorded what it said were fake sales worth more than 400 million yuan to a company in Wuhan city and a company in Hefei city as if they were external customers. In reality, these so-called customers were subsidiaries of Kelon set up by Gu's associates using false identification documents.

Kelon recorded sales of goods to these two companies with fake transport documents stating the goods were shipped to customers. All along, the goods were stored in Kelon's warehouse in Jiangxi province, said CSRC. In 2005, these goods were returned, according to Kelon's records.

'A return of such large amounts of goods is not normal business practice but Kelon playing games to inflate sales,' said CSRC.



CSRC tells how Kelon workers grabbed papers and ran