TORONTO—Allen Chan, the former CEO of Sino-Forest Corp., was the “controlling mind” behind alleged frauds that robbed shareholders of value, a securities tribunal heard today.
Closing arguments began in the Ontario Securities Commission case against Sino-Forest executives who are accused of perpetrating a massive fraud before the forestry company collapsed in 2012.
Hugh Craig, a lawyer for the commission, says Chan was a “hands-on” CEO and that the frauds would not have taken place without him.
Sino-Forest, which was established in 1994, was the first and largest foreign-owned forestry company in China.
The company did most of its business in China even though it was based in Ontario.
At its peak, Sino-Forest was the most valuable forestry company listed on the Toronto Stock Exchange, with a market capitalization of $6 billion.
From June 2005 to March 2011, the company’s shares rose by 340 per cent from $5.75 per share to $25.30 per share.
The Ontario Securities Commission has accused former top executives Allen Chan, Albert Ip, Alfred Hung, George Ho and Simon Yeung of lying to investors and misleading investigators by inflating the company’s assets and revenue.
The commission alleges the five men took part in “deceitful conduct” that included the fabrication of assets and revenue, undisclosed relationships with suppliers and customers and providing misleading documentation to support the alleged fraud.
The securities watchdog claims the executives misled investors by issuing false financial statements in every quarter from 2007 to 2010.
Chan’s lawyer, Emily Cole, has argued that many of the company’s business practices, which may seem peculiar to North Americans, were actually “workarounds” that Sino-Forest had to engage in because they were operating in China, where business practices are different.
Markus Koehnen, a lawyer representing the four other accused, has argued that what is being painted as fraud by the commission should actually be seen as operational mistakes made by a fast-growing company.