The China-based natural gas company and its chairman were charged with fraud by the US SEC for concealing loans designed to benefit the chairman’s family. The chairman and former CEO (Ji) in January 2010 arranged for two improper loans totaling US$14.3m and then lied about them to the company’s board, investors and auditors. Ji concealed a US$9.9m loan made through a sham borrower to a real estate firm, Demaoxing Real Estate Co, owned by his son and nephew. It said Ji also concealed a US$4.4m loan to Shaanxi Juntai Housing Purchase Co, a business partner of Demaoxing and whose general manager was Ji’s friend. The SEC said Ji told China Natural Gas directors that the loans involved senior Chinese government officers in charge of a liquid natural gas project, and “repeated this lie” to investors on a May 10, 2010, quarterly earnings conference call.
It also said China Natural Gas did not properly report a $19.6 million acquisition made in the fourth quarter of 2008. To settle the SEC’s charges, China Natural Gas agreed to pay a penalty of $815,000, and Ji agreed to pay a penalty of $100,000. Ji also agreed to reimburse China Natural Gas his trading profit of $77,479.
Reuters: SEC charges China Natural Gas, chairman with fraud, 15 May 2012
SEC: China Natural Gas and Executive Settle Fraud Charges, 7 Jun 2013
Resignation of Audit Commitee members, 6 Jun 2011
China Natural Gas: Annual Report 2009