Sino-Forest Corp. has published new documents in its data room to try and refute fraud allegations from Muddy Waters LLC that one of the companies it has done business with is actually a related party.
In short seller Carson Block’s report on Sino-Forest, he claimed that a company called Huaihua City Yuda Wood Company Ltd. is secretly a subsidiary of Sino-Forest. This is a serious allegation, as Huaihua Yuda has received significant payments from Sino-Forest.
Mr. Block’s evidence that they are related parties is an article on a Chinese government website from 2006 that said so.
On Friday, Sino-Forest put two documents in its data room. One of them is a letter from Huaihua Yuda to the Huaihua City Bureau of Commerce (dated June 9, 2011) in which it denies being a Sino-Forest subsidiary and asks the bureau to correct the article on the website. The other is a response from the bureau on June 15th in which it apologizes to Huaihua Yuda for the apparent error and said it is amending the article.
“We have confirmed that your company is in fact a subsidiary of Sonic Jita Engineering Limited from Hong Kong and not of the Canadian listed company Sino-Forest Corporation. We apologize for any inconvenience caused to your company by this administrative error on the part of the bureau,” the translated document said.
These new documents form just part of Sino-Forest’s ever-growing data room, as it tries to publish as many documents as possible to prove that its forestry business in China is legitimate. Mr. Block accuses it of being a massive fraud, and there are many other allegations that Sino-Forest needs to refute