Hall of Shame

AgFeed Industries (FEED US)

AgFeed Industries produced premix and blended feeds and animal nutrients primarily for hogs in China. The Company also raised hogs for slaughter and breeding stock. AgFeed was based in China and publicly traded in the U.S. before merging with a U.S. company in September 2010, and spreading its operations between the two countries. The fraud was initially perpetrated by the Chinese management, starting in 2008; however, the US-based management only uncovered it in 2011 but then avoided or delayed making it public while trying to engage in efforts to raise capital for expansion and acquisitions.

With the bulk of its hog production operations in China, the executives used a variety of methods to inflate revenue from 2008 to mid-2011, including fake invoices for the sale of feed and purported sales of hogs that didn’t really exist. They later tried to cover up their actions by saying the fake hogs died. Because fatter hogs bring higher market prices, they also inflated the weights of actual hogs sold and correspondingly inflated the sales revenues for those hogs.

The company voluntarily delisted[1] from the NASDAQ in 2012, applied[2] for Chapter 11 bankruptcy protection in July 2013, was charged by the SEC[3] in March 2014 and ordered[4] to pay investors US$18m for the fraud in September 2014.

[1] Bloomberg: Fake Profit E-Mails at AgFeed’s Farms Back Fraud Claims, 23 Dec 2013

[2] WSJAgFeed Files for Chapter 11 Bankruptcy, 15 Jul 2013

[3] SEC: SEC Charges Animal Feed Company and Top Executives in China and U.S. With Accounting Fraud, 11 Mar 2014

[4] Compliance Week: AgFeed Industries to Pay $18 Million for Accounting Fraud, 17 September 2014

The Auditors: AgFeed - A China Fraud Dissected - Part 1: Milton Webster, AgFeed Audit Committee Member and Whistleblower, 26 Feb. 2014
The Auditors: AgFeed - A China Fraud Dissected - Part 2: AgFeed’s Auditors , 28 Feb. 2014
The Auditors: AgFeed - A China Fraud Dissected - Part 3: AgFeed’s Trusted Advisors Protiviti and Latham & Watkins, Mar. 7, 2014

Agfeed Industries: Annual Report 2008
Agfeed Industries: Annual Report 2009
Agfeed Industries: Annual Report 2010