Hong Kong Market Misconduct Tribunal Orders China Forestry Holdings ex-CEO Li Han Chun & His Investment Vehicle Top Wisdom Overseas Holdings to Give Up HKD 353 Million ($45 Million) of Avoided Loss by Insider Trading of China Forestry Shares, ex-Chairman Li Kwok Cheong & CEO Li Han Chun Banned for 5 Years after Found Guilty of Providing False & Misleading Information in IPO Prospectus & Annual Results for 2009, Overstated Turnover by 91.56% in 2008 & by 99.99% in 2009, Customers Were Non-Existent or Not Genuine, False Documents Including Forestry Rights, Auditor KPMG Had Highlighted Checks on False Documentations During Meeting in 2010 December, China Forestry Raised HKD 1.67 Billion in IPO ($214 Million) in 2009
2nd December 2024 | Hong Kong
The Hong Kong Market Misconduct Tribunal (MMT) has ordered China Forestry Holdings ex-CEO Li Han Chun & his investment vehicle Top Wisdom Overseas Holdings to give up (disgorge) HKD 353 million ($45 million) of avoided loss by insider trading of China Forestry shares. In 2024 October, China authorities are investigating corruption & mismanagement by China Forestry top executives including bribery by ex-Chairman Song Quanli. In 2024 August, the Hong Kong Market Misconduct Tribunal (MMT) has found China Forestry Holdings ex-Chairman Li Kwok Cheong & CEO Li Han Chun guilty of providing false & misleading information in IPO prospectus & annual results for 2009, overstating turnover by 91.56% in 2008 & by 99.99% in 2009, customers were non-existent or not genuine, and false documents including forestry rights, logging permits & bank statements. CEO Li Han Chun & his personal investment vehicle (Top Wisdom Overseas Holdings) had also sold 119 million shares in 2011 January, and avoided loss of HKD 353 million ($45 million) after auditor KPMG had highlighted checks on false documentations during meeting in 2010 December. China Forestry had raised HKD 1.67 billion in IPO ($214 million) in 2009. Hong Kong Securities & Futures Commission (28/11/24): “The Market Misconduct Tribunal (MMT) has ordered Mr Li Han Chun, the former chief executive officer (CEO) of China Forestry Holdings Company Limited (China Forestry), and his investment vehicle, Top Wisdom Overseas Holdings Limited (Top Wisdom), to disgorge $353,430,000 which represents the loss they avoided by insider dealing of China Forestry’s shares (Notes 1 to 5). The MMT also imposed the following orders against Li Han Chun and Mr Li Kwok Cheong, the former chairman of China Forestry, as a result of the MMT’s finding that they disclosed false or misleading information in China Forestry’s IPO prospectus, annual results announcement, and annual report for the year ended 31 December 2009, inducing transactions in the company’s shares: 1) Disqualification orders for five years, which prohibit them from being a director, liquidator, or receiver or manager of the property or business of, or being concerned or taking part in the management of, any listed or unlisted corporation in Hong Kong, without leave of the court (Note 6); 2) Cold shoulder orders for five years, which ban them from dealing in any securities, futures contract, leveraged foreign exchange contract or collective investment scheme in Hong Kong (Note 7); and 3) Cease and desist orders, which prohibit them from engaging in any conduct which constitutes market misconduct (Note 8). The MMT further ordered Li Han Chun, Li Kwok Cheong and Top Wisdom to pay the costs and expenses incurred by the Government and the SFC (Note 9).”
“ Hong Kong Market Misconduct Tribunal Orders China Forestry Holdings ex-CEO Li Han Chun & His Investment Vehicle Top Wisdom Overseas Holdings to Give Up HKD 353 Million ($45 Million) of Avoided Loss by Insider Trading of China Forestry Shares, ex-Chairman Li Kwok Cheong & CEO Li Han Chun Banned for 5 Years after Found Guilty of Providing False & Misleading Information in IPO Prospectus & Annual Results for 2009, Overstated Turnover by 91.56% in 2008 & by 99.99% in 2009, Customers Were Non-Existent or Not Genuine, False Documents Including Forestry Rights, Auditor KPMG Had Highlighted Checks on False Documentations During Meeting in 2010 December, China Forestry Raised HKD 1.67 Billion in IPO ($214 Million) in 2009 “
Notes:
- The proceedings were heard before the MMT Chairman, Mr Michael Lunn, GBS and two members.
- Please see the SFC’s press releases dated 7 August 2024 and 28 June 2018.
- The MMT report setting out the reasons of making the relevant orders is available on its website (www.mmt.gov.hk).
- China Forestry was listed on the Main Board of The Stock Exchange of Hong Kong Limited on 3 December 2009. On 26 January 2011, trading in the shares of China Forestry was suspended after discovery of serious irregularities by its then auditors KPMG. Pursuant to an Order of the Grand Court of the Cayman Islands dated 18 June 2015, China Forestry was wound-up in accordance with the law of the Cayman Islands. On 24 February 2017, the listing of China Forestry’s shares was cancelled.
- The disgorgement order was made under section 257(1)(d) of the Securities and Futures Ordinance (SFO) for any profit gained or loss avoided by the person to be paid to the Government. The MMT has further ordered that, pursuant to section 259 of the SFO, Li Han Chun and Top Wisdom shall pay compound interest on the disgorged sum of $353,430,000, calculated from 12 January 2011 with yearly rests.
- The disqualification orders were made under section 257(1)(a) of the SFO where the maximum period of the disqualification is five years.
- The cold shoulder orders were made under section 257(1)(b) of SFO where the maximum period of the order is five years.
- The cease and desist orders were made under section 257(1)(c) of the SFO.
- The costs orders were made under sections 257(1)(e) and (f) of the SFO.
China Authorities Investigating Corruption & Mismanagement by China Forestry Top Executives Including Bribery by ex-Chairman Song Quanli, Hong Kong Market Misconduct Tribunal Found in 2024 August China Forestry Holdings ex-Chairman Li Kwok Cheong & CEO Li Han Chun Guilty of Providing False & Misleading Information in IPO Prospectus & Annual Results for 2009, Overstated Turnover by 91.56% in 2008 & by 99.99% in 2009, Customers Were Non-Existent or Not Genuine, False Documents Including Forestry Rights, Logging Permits & Bank Statements, CEO Li Han Chun & Personal Investment Vehicle Top Wisdom Overseas Holdings Sold 119 Million Shares in 2011 January & Avoided Loss of HKD 353 Million ($45 Million) after Auditor KPMG Had Highlighted Checks on False Documentations During Meeting in 2010 December, China Forestry Raised HKD 1.67 Billion in IPO ($214 Million) in 2009
19th October 2024 – China authorities are investigating corruption & mismanagement by China Forestry top executives including bribery by ex-Chairman Song Quanli. In 2024 August, the Hong Kong Market Misconduct Tribunal (MMT) has found China Forestry Holdings ex-Chairman Li Kwok Cheong & CEO Li Han Chun guilty of providing false & misleading information in IPO prospectus & annual results for 2009, overstating turnover by 91.56% in 2008 & by 99.99% in 2009, customers were non-existent or not genuine, and false documents including forestry rights, logging permits & bank statements. CEO Li Han Chun & his personal investment vehicle (Top Wisdom Overseas Holdings) had also sold 119 million shares in 2011 January, and avoided loss of HKD 353 million ($45 million) after auditor KPMG had highlighted checks on false documentations during meeting in 2010 December. China Forestry had raised HKD 1.67 billion in IPO ($214 million) in 2009. Hong Kong Securities & Futures Commission (SFC) 7/8/24: “The Market Misconduct Tribunal (MMT) has found Mr Li Kwok Cheong and Mr Li Han Chun, former chairman and chief executive officer (CEO) of China Forestry Holdings Company Limited (China Forestry), culpable for disclosing false or misleading information in China Forestry’s IPO prospectus and its annual results announcement and annual report for the year ended 31 December 2009, inducing transactions in the company’s shares (Notes 1 to 3). The MMT found that China Forestry’s IPO prospectus and its 2009 annual results announcement and annual report contained numerous false or misleading statements covering China Forestry’s turnover generating activities, profit, plantation assets and bank balances. Specifically, China Forestry’s reported turnover was overstated by 91.56% and 99.99% for the years ended 31 December 2008 and 2009. The MMT also found that the purported customers of China Forestry were either non-existent or not genuine, and the company engaged in a substantial and ongoing falsification of documents, including the forestry rights certificates, logging permits and bank statements, to conceal the false statements. The MMT concluded that Li Han Chun and Li Kwok Cheong knew such statements were false or misleading when authorising the issuance of the IPO prospectus and the 2009 annual results announcement and annual report (Note 4). The MMT also found Li Han Chun and his investment vehicle, Top Wisdom Overseas Holdings Limited, engaged in insider dealing by selling 119,000,000 shares of China Forestry through a share placement in January 2011, thereby avoiding a loss of approximately $353 million. The MMT held that Li Han Chun was aware of the imminent danger facing China Forestry shares following a pre-audit meeting with China Forestry’s then auditors KPMG in early December 2010. KPMG indicated during the meeting that various audit procedures were to be performed on areas where rampant falsification of documentation had occurred. Li Han Chun knew that such enquiries could expose the reality of the situation and spell disaster for the value of China Forestry shares. The MMT is satisfied that it was with that knowledge that Li Han Chun started to take steps to dispose of his holdings in China Forestry.
Hong Kong Market Misconduct Tribunal Finds China Forestry Holdings ex-Chairman Li Kwok Cheong & CEO Li Han Chun Guilty of Providing False & Misleading Information in IPO Prospectus & Annual Results for 2009, Overstated Turnover by 91.56% in 2008 & by 99.99% in 2009, Customers Were Non-Existent or Not Genuine, False Documents Including Forestry Rights, Logging Permits & Bank Statements, CEO Li Han Chun & Personal Investment Vehicle Top Wisdom Overseas Holdings Sold 119 Million Shares in 2011 January & Avoided Loss of HKD 353 Million ($45 Million) after Auditor KPMG Had Highlighted Checks on False Documentations During Meeting in 2010 December, China Forestry Raised HKD 1.67 Billion in IPO ($214 Million) in 2009
9th August 2024 – The Hong Kong Market Misconduct Tribunal (MMT) has found China Forestry Holdings ex-Chairman Li Kwok Cheong & CEO Li Han Chun guilty of providing false & misleading information in IPO prospectus & annual results for 2009, overstating turnover by 91.56% in 2008 & by 99.99% in 2009, customers were non-existent or not genuine, and false documents including forestry rights, logging permits & bank statements. CEO Li Han Chun & his personal investment vehicle (Top Wisdom Overseas Holdings) had also sold 119 million shares in 2011 January, and avoided loss of HKD 353 million ($45 million) after auditor KPMG had highlighted checks on false documentations during meeting in 2010 December. China Forestry had raised HKD 1.67 billion in IPO ($214 million) in 2009. Hong Kong Securities & Futures Commission (SFC) 7/8/24: “The Market Misconduct Tribunal (MMT) has found Mr Li Kwok Cheong and Mr Li Han Chun, former chairman and chief executive officer (CEO) of China Forestry Holdings Company Limited (China Forestry), culpable for disclosing false or misleading information in China Forestry’s IPO prospectus and its annual results announcement and annual report for the year ended 31 December 2009, inducing transactions in the company’s shares (Notes 1 to 3). The MMT found that China Forestry’s IPO prospectus and its 2009 annual results announcement and annual report contained numerous false or misleading statements covering China Forestry’s turnover generating activities, profit, plantation assets and bank balances. Specifically, China Forestry’s reported turnover was overstated by 91.56% and 99.99% for the years ended 31 December 2008 and 2009. The MMT also found that the purported customers of China Forestry were either non-existent or not genuine, and the company engaged in a substantial and ongoing falsification of documents, including the forestry rights certificates, logging permits and bank statements, to conceal the false statements. The MMT concluded that Li Han Chun and Li Kwok Cheong knew such statements were false or misleading when authorising the issuance of the IPO prospectus and the 2009 annual results announcement and annual report (Note 4). The MMT also found Li Han Chun and his investment vehicle, Top Wisdom Overseas Holdings Limited, engaged in insider dealing by selling 119,000,000 shares of China Forestry through a share placement in January 2011, thereby avoiding a loss of approximately $353 million. The MMT held that Li Han Chun was aware of the imminent danger facing China Forestry shares following a pre-audit meeting with China Forestry’s then auditors KPMG in early December 2010. KPMG indicated during the meeting that various audit procedures were to be performed on areas where rampant falsification of documentation had occurred. Li Han Chun knew that such enquiries could expose the reality of the situation and spell disaster for the value of China Forestry shares. The MMT is satisfied that it was with that knowledge that Li Han Chun started to take steps to dispose of his holdings in China Forestry.
Notes:
- The SFC instituted proceedings in the MMT against the duo for market misconduct in 2018. A copy of the SFC’s Notice of the MMT proceedings is available on the MMT’s website. Please see the SFC’s press release dated 28 June 2018.
- China Forestry was listed on the Main Board of The Stock Exchange of Hong Kong on 3 December 2009. It raised a net proceed of approximately $1.6776 billion in its initial public offering.
- On 26 January 2011, trading in the shares of China Forestry was suspended after discovery of serious irregularities by its then auditors KPMG. Pursuant to an Order of the Grand Court of the Cayman Islands dated 18 June 2015, China Forestry was wound-up in accordance with the law of the Cayman Islands. On 24 February 2017, the listing of China Forestry’s shares was cancelled.
- While the MMT is satisfied that both Li Kwok Cheong and Li Han Chun had knowledge of the false statements when approving the interim results announcement and interim report for the six months ended 30 June 2010, the MMT is of the view that the collective effect of the false information in the interim report was neutral and not likely to induce investors either to sell or purchase China Forestry shares.
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