March 30th, 2011 Wuyi Pharma's Earnings and Special Dividend
For those looking, please download the Wuyi Pharma annual report here.
The Lin brothers need cash.
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March 30th, 2011 Serious Allegations Against CCME
Looking at the latest 8-K released by CCME, we get details on the Deloitte reasons for its resignation.
From the 8-K:
Prior to its resignation, DTT raised the following issues encountered during the audit, including: issues related to the authenticity of bank statements; a loss of confidence in bank confirmation procedures carried out under circumstances which DTT believed to be suspicious; issues concerning the validity of certain advertising agents/customers and bus operators (including with respect to certain of the Company's top ten customers); concerns over possible undisclosed bank accounts and bank loans; information on file with the State Administration of Industry and Commerce as to certain subsidiaries appearing to be inconsistent with comparable financial information provided to DTT; the verification of the validity of a sampling of tax invoices issued in connection with certain large transactions; the verification of certain subsidiary tax payments with the local office of the State Administration of Taxation; the verification of salary payments made in cash directly to employee bank accounts; the verification of the production process for advertising programs; and the potential double counting of a certain number of buses.
The biggest thing that troubles me is the bank statement and confirmation procedures. I mean, the CFO, Jacky Lam, is a PWC auditor... how can he mess up the bank statements and confirmation procedure? What the hell is going on there?
If I were DTT and I was doing a SAS 99 audit, that would be the biggest red flag. Everything else is, "ok...we'll take some time to verify that..." But the bank statements gotta be simple, straightforward and clean.
Furthermore in the 8-K:
As a result, DTT had requested that the bank confirmation process be re-done at the banks' head office and that the issues described above be addressed by an independent forensic investigation. DTT stated in its resignation letter that, in its view, the Company was not in good faith willing to proceed with the course of action requested by DTT; however, the Company believes that it was working to address these items at the time of DTT's resignation. DTT discussed the subject matter of these reportable events and disagreements with the Company's Audit Committee.
The person in charge of the CCME audit committee is Marco Kung, another Wuyi Pharma/Lin Brother insider. What the hell was he doing? DTT alleges that CCME was not in good faith... Marco is in charge of that. He was suppose to grant DTT the right to speak to CCME's bank. Why didn't that happen? That's a simple phone call and signature.
So even though, we only have allegations here... allegations from the CFO, CV Starr, and DTT, but these allegations gives some insight into procedural and intentional screw-ups. They are serious and real red flags.
Until more facts come forth, I will maintain a wait n' see.
As for the new auditor... There will be no new auditor until a full forensics investigation is done. An investigation team will be hired. That is what the company will announce next and file a plan with the Nasdaq to remain listed and halted (90% certainty). Yes, I believe the halt will continue until the investigation is done. Judging by the precedence of ONP and RINO, we might see a resumption of trading by CCME in May or even June.
