Photo: Daniel Thornton via flckr
The Globe and Mail’s Mark MacKinnon and Andy Hoffman have an interesting story about a Canadian businessman getting thrown in jail for writing a negative research report on a Chinese mining company’s stock.30-five year-old Huang Kun had prepared a report alleging that Silvercorp, whose headquarters is in Vancouver but whose main operation is in central-west China, had overstated its production and the amount of precious metals contained in its mines.
When the report was released, the stock’s price on the Toronto Stock Exchange tanked 20 per cent. Huang worked for a company that shorted the stock.
Huang was picked up at Beijing’s airport trying to leave for Hong Kong. MacKinnon and Hoffman write that he was strip-searched and placed in a cell in the Beijing First Detention Centre with 12 other inmates.
[Huang] has been prevented from leaving China for more than eight months, and was made to pay $32,000 in a form of unofficial bail, before being re-arrested in July.
Mr. Huang’s lawyer, Wang Yuehong, believes he will be charged any day now with ‘disseminating false facts to impair another person’s commercial reputation,’ a criminal offence that carries a maximum punishment of two years in prison. If charged, Mr. Huang’s chances of winning his argument in court are exceedingly small: conviction rates in China are above 98 per cent.
The arrest is part of a new government campaign to crack down on speculators betting that certain Chinese companies will fail, MacKinnon and Hoffman write.
Chinese authorities are understood to be deeply concerned about the reputational damage caused by the wave of corporate scandals. And they want the bad press to stop.
“The attacks by shorters and the issues related to a number of U.S.-listed Chinese companies have caught the attention of officials at the Ministry of Commerce and the National Development and Reform Commission,” said a Canadian lawyer with high-profile Chinese corporate clients who is well connected in Beijing and spoke on the condition of anonymity.
“They don’t think it is necessarily a single isolated action. So things like this have started to climb to the top of attention among senior officials.”
Read the whole story at TheGlobeAndMail.com.
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