Longwei Petroleum (fka LPIH)

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Interesting article from the Financial Times

People wonder why Longwei isn't saying more. This article might help you to understand the reasons. Carson Block also makes an interesting comment. "When you have a company with a relationship with a sovereign wealth fund – that’s something we will have to think about for next time". If the company is a fraud what difference does it make? The answer is it makes it easier to fight a weaker company who is more prone to give up rather than fight. Also read about what Andrew Left did and what GEO is doing right now below.

By then it had strong financial returns, and its negative report on any Chinese company with any reason would cause its stock to crater. It was no longer necessary to be right! Citron could short a legitimate stock, write a negative report, others would short or sell in a panic, and then Citron could pocket a nice profit quickly, whether the report was truthful or no

Target groups find ways to fight short sellers


By Jennifer Hughes, Simon Rabinovitch and Sam Jones


Targets of short sellers might think a lawsuit is the most obvious weapon to reach for when preparing a counterattack. But Olam is only the second of Muddy Waters’ victims to sue Carson Block, head of the short selling firm, for libel.
Representatives of both New Oriental Education and Technology Group and Orient Paper – two of the Chinese companies targeted by Muddy Waters – said separately that lawyers had advised them to hold back.

After the attacks, the companies faced class-action lawsuits and questions from the US Securities and Exchange Commission. Adding another lawsuit would have increased legal fees and delayed settlement of shareholder lawsuits until after the libel charge had been dealt with.
“What can you do? Your lawyers tell you to shut up, and the SEC gags you as well. So there’s nothing you can do,” says Louis Hsieh, chief financial officer of New Oriental. “You just go through it, take it and then prove you did nothing wrong. And then eight months later everything is fine. But it’s a hellish four or five months.”
Mr Hsieh called an emergency board meeting as soon as he heard of the Muddy Waters report. The board appointed an investigative committee of three independent directors and outside legal counsel. It also convened a teleconference for investors and analysts. And, over the next three months, the five most senior managers bought nearly $40m in shares. “We put our money where our mouth is,” Mr Hsieh says.
Mr Block told the Financial Times that he always expects litigation, but he was surprised by the swiftness of Olam’s response, which came after he had given a private presentation of his thesis but before he had even published his report.
Olam’s Singapore-listed shares have fallen about a fifth since Mr Block’s presentation, in spite of a subsequent capital raising fully underwritten by Temasek, the Singapore state investment agency and its second-biggest shareholder. Mr Block admits that Muddy Waters probably did not pay enough attention to the way a big sovereign shareholder could affect its position. “When you have a company with a relationship with a sovereign wealth fund – that’s something we will have to think about for next time.”
Kai-Fu Lee, the former head of Google’s China operations, took an entirely different approach to fighting off short sellers. Earlier this year, he led a group of Chinese executives and investors in confronting Andrew Left, head of Citron Research, after Mr Left called Qihoo 360, a Chinese search engine, “the most overvalued and misunderstood Chinese internet stock”.
Mr Lee created a website, citronfraud.com, which declares its purpose is to expose “malicious reality distortion” in short sellers’ reports. Mr Lee accused the China shorts of writing “reports full of holes and lies, knowing that their American readers have no way of verifying them”.
Citron now finds itself in a position not unfamiliar to the companies it has shorted – fighting back to defend its reputation. Its lawyers sent a letter to Mr Lee and his associates in September demanding a retraction and threatening a lawsuit. In October, Mr Left sued Mr Lee and his associates for libel.
“Over the past 11 years we have published some of the most comprehensive and truthful information on over 130 US and Chinese equities,” Citron said.
This article has been amended since publication to reflect the fact that Olam was the second subject of a Muddy Waters’ report to sue the short seller


Take a look at the roasting Andrew left of Citron is getting at this site:

http://www.citronfraud.com


The Dark Side of Andrew Left

Citron Research is a one-man show run by Mr. Andrew Left, whose fraudulent career began with a huge black mark. In 1998, in his first job, Mr. Left was found by the National Futures Association to have: “MADE FALSE AND MISLEADING STATEMENTS TO CHEAT, DEFRAUD OR DECEIVE A CUSTOMER IN VIOLATION OF NFA COMPLIANCE RULES 2-2(a) AND 2-29(a)(1). ” Mr. Left was debarred for three years, among other punishments. This finding can be found on the website of the National Futures Association.

After being debarred, Mr. Left was employed as the President & CEO of Detour Media in 1999. But in February 2002, his company sued him for stealing six checks worth about $25,000. In Detour Media’s official SEC filing, the company alleged Mr. Left’s “fraud and deceit, negligent misrepresentation, breach of fiduciary duty and unlawful monetary conversion.” This legal paperwork, as well as the final judgment (Mr. Left had to pay $26,445.22) can be found on Court orders Mr. Left to pay $26,445.62 for lawsuit (fraud and deceit).

In 2005, Mr. Left founded www.stocklemon.com, a predecessor to www.citronresearch.com. On this website, he slammed a company called WHIS, and one of WHIS’s principals, Mr. Salim Rana. He fabricated information about Mr. Rana (calling him a thief who steal from the elderly), and Mr. Rana sued Mr. Left for libel. Mr. Left failed to comply with the court’s order for discovery. As a result, the court issued a judgment, ordering Mr. Left to pay Mr. Rana $2,500,000 for damages. The documents can be found here: Court orders Mr. Left to pay $2,500,805.64 for lawsuit (libel)

In 2010, Mr. Left again ran into trouble with the law, in an altercation with a businessman. He was arrested in Florida. In addition, the records show that he was charged for “failing to appear.” His arrest record, along with his mug shot, can be found here.

One has to wonder why an investor would trust the investment advice of someone with a record of fraud, deceit, and unlawful behavior.



Citron’s Methodology

Andrew Left’s company Citron provides investment advice, typically in the form of shorting stocks that Citron believes to be fraudulent or have “terminal business models.” Citron also invests its own money, and presumably makes its short trades before its readers do, and gets in at a better price than its readers.

Citron began shorting and attacking Chinese stocks in 2006, with a good record until mid-2011. This “golden period” was made possible by a wave of reverse mergers that took a number of fraudulent Chinese companies public. Citron and its customers made good profit from 2006 until 2011 by exposing these fraudulent companies.

However, in 2011, as more scrutiny is applied in US and China, Citron found that the “easy picking” days were over, and that it had become very hard to find more fraudulent Chinese companies. This situation led Citron to a more radical road. By then it had strong financial returns, and its negative report on any Chinese company with any reason would cause its stock to crater. It was no longer necessary to be right! Citron could short a legitimate stock, write a negative report, others would short or sell in a panic, and then Citron could pocket a nice profit quickly, whether the report was truthful or not!

One might ask: how can they get away with a false negative report? This is where the information asymmetry comes in. Chinese companies are a mystery to the American investors. Citron advertises itself as “Citron knows China“, and with its earlier track record, the American investors were eager to believe what it said, with no means or desire to verify. Few bothered to find out that this short seller himself can’t read or speak Chinese and hasn’t put his feet on China for ten years, according to an interview he took recently.

Emboldened by this malicious realization, Citron started down the slippery slope of attacking companies arbitrarily. In June, 2011, Citron attacked Harbin Electric, on which it issued five reports, claiming that “shareholders are holding a company that is a potential 0….yes a 0, as in donut. ” Citron’s report Caused Harbin share price to drop from $16.50 to $8. However, to Citron’s chagrin, Harbin was acquired a few months later for $24 per share.

In November 2011, Citron began its series of attacks on Qihoo, with a target price of $5 (Qihoo was at about $18). Qihoo responded to each attack forcefully, and media concluded “Citron lacked a basic understanding of Qihoo in the beginning”. Today, Qihoo stock is trading at $23.

In March 2012, Citron made an unusual buy recommendation on Sohu, with a target price of $90 (it was at $54). Today, Sohu is trading at $39.

Perhaps desperate that it hasn’t been right with Chinese stocks for over a year, or perhaps facing margin calls from its poor bets, Citron rushed and came out with the ill-fated report “Qihoo’s entry into search puts SOHU in play”. This report was full of holes, including misunderstanding Sohu’s basic products, fabricating a non-existing product, and zeroing out $98M of revenue.

Even more damning to Citron’s fate, an expert decided to rip apart Citron’s malicious scheme on information asymmetry. Dr. Kai-Fu Lee (former President of Google China) wrote a paper “China Short Sellers: Exposing Fraud, or Practicing Fraud?” This paper ruthlessly exposed Citron’s ignorance and deception, and this time the market ignored Citron’s recommendations, with both stocks now trading at the same level.

Dr. Lee’s report not only discredited Citron, but also created awareness (and disgust) in China about Citron. A group of about sixty Chinese business and investment leaders joined together to condemn Citron. This website was created for these voices to get heard.

Shortly after Dr. Lee’s report, another report authored by nine top web game CEOs in China again challenged Citron’s reports about games. These CEOs proved that Citronlacked basic understanding of the Chinese gaming market — Citron didn’t understand different types of gaming companies, and not even how to measure games. Citron challenged certain numbers and even bet 100,000 RMB, but the nine executives proved the numbers were accurate. These executives concluded Citron’s analysis is “as amateurish as its claims outrageous.”

Finally, a group of 65 Chinese business leaders joined together to condemn Citron for its inaccurate and misleading reports, and call for investors not to be fooled.

Andrew Left is the guy who proved that GEO was wrong about CCME.