Sino-Forest Corporation (Sino-Forest) () () claimed at one time to be one of the leading commercial

forest plantation A tree plantation, forest plantation, plantation forest, timber plantation or tree farm is a forest planted for high volume production of wood, usually by planting one type of tree as a monoculture forest. The term ''tree farm'' also is used to ...

operators in

China China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's most populous country, with a population exceeding 1.4 billion, slightly ahead of India. China spans the equivalent of five time zones and ...

. In 2011, the company was accused of fraud and found itself under investigation by the

Royal Canadian Mounted Police The Royal Canadian Mounted Police (RCMP; french: Gendarmerie royale du Canada; french: GRC, label=none), commonly known in English as the Mounties (and colloquially in French as ) is the federal police, federal and national police service of ...

and the

Ontario Securities Commission The Ontario Securities Commission (OSC) is a regulatory agency which administers and enforces securities legislation in the Canadian province of Ontario. The OSC is an Ontario Crown agency which reports to the Ontario legislature through the Minis ...

. On March 30, 2012 Sino-Forest filed for bankruptcy protection in Canada. It also announced that the company would be sold or restructured, with the proceeds going to its creditors. On July 13, 2017, the OSC released its decision finding that Sino-Forest and four individuals, including former CEO Allen Chan, committed fraud. It is not to be confused with China Forestry Holdings Ltd. (HK:0930) or the Chinese state-owned China Forestry Group Corporation (CFGC).''

History

The company was formed in 1994 and subsequently claimed that its principal businesses included the ownership and management of tree plantations and complementary manufacturing of downstream engineered-wood products. The company claimed to derive most of its revenue from the sales of

wood fibre Wood fibres (also spelled wood fibers, see spelling differences) are usually cellulosic elements that are extracted from trees and used to make materials including paper. The end paper product (paper, paperboard, tissue, cardboard, etc.) dictates ...

needed to produce industrial, commercial and residential wood products. Sino-Forest also held a majority interest in Omnicorp Limited, an investment

holding company A holding company is a company whose primary business is holding a controlling interest in the securities of other companies. A holding company usually does not produce goods or services itself. Its purpose is to own shares of other companies ...

listed in Hong Kong (HK:0094) that in turn claimed to import wood fibre into China. Sino-Forest's common shares traded on the

Toronto Stock Exchange The Toronto Stock Exchange (TSX; french: Bourse de Toronto) is a stock exchange located in Toronto, Ontario, Canada. It is the 10th largest exchange in the world and the third largest in North America based on market capitalization. Based in t ...

under the symbol TRE from 1995 until they were suspended in 2011, and its corporate office were in Mississauga, Canada. Sino-Forest had a

market capitalization Market capitalization, sometimes referred to as market cap, is the total value of a publicly traded company's outstanding common shares owned by stockholders. Market capitalization is equal to the market price per common share multiplied by t ...

of just over $5 billion in November 2010. As of September 30, 2009, Sino-Forest claimed to have had approximately 757,000 hectares of trees under management and over 700,000 hectares of trees available to be acquired under six long-term master agreements. The company claimed to have plans to replant 200,000 hectares by 2012. Management further claimed that it expected to benefit from China's economic stimulus plan, which included further infrastructure development, rebuilding after Sichuan's 2008 earthquake and building of

affordable housing Affordable housing is housing which is deemed affordable to those with a household income at or below the median as rated by the national government or a local government by a recognized housing affordability index. Most of the literature on affo ...

for rural areas.

Business segments

At the end of September 2010, Sino-Forest Corp had claimed approximately 757,000 hectares of forest plantations located in southern China. Its principal business segments include Wood Fibre Operations (i.e. the ownership and management of plantation trees, the sale of standing timber and wood logs, the trading of wood products sourced domestically and internationally) and Manufacturing and Other Operations (i.e. downstream engineered-wood flooring and panels, seedling nurseries, greenery services).

Subsidiaries

Sino-Forest Corporation owned an interest of approximately 60% of Omnicorp Limited (to be renamed Greenheart Group Limited upon shareholder approval), a Hong Kong listed company (HK:0094). In addition, Sino-Forest owned HK$212 million of convertible bonds of Omnicorp, which if fully converted would increase Sino-Forest's interest to nearly 60% of the enlarged issued share capital of Omnicorp. The principal activities of Omnicorp's subsidiaries claimed to consist of log harvesting, lumber processing and marketing and sales of logs and lumber products to China and other countries around the world. Omnicorp claimed to own 60.4% of the harvesting and other rights in a 184,000-hectare hardwood forest concession in Suriname, South America and Sino-Forest, through its wholly owned subsidiary Sino-Capital Global Inc. owned the remaining 39.6%. Omnicorp also intended to acquire a high quality radiata pine plantation in New Zealand upon satisfaction of certain conditions as announced on November 3, 2010.

ARCPE

Sino-Forest Applied Research Centre for Pearl River Delta Environment (ARCPE) officially opened on 22 June 2009 at the

Hong Kong Baptist University Hong Kong Baptist University (HKBU) is a publicly funded tertiary liberal arts education, liberal arts institution with a Christian ethics, Christian education heritage. It was established as Hong Kong Baptist College with the support of Ame ...

. The Centre remains active with Sino-Forest name.

Reported financial position as of December 31, 2010

The company's claimed assets grew significantly from 2004 to 2010. The reported assets were: * 2004 $0.7 billion * 2005 $0.8 billion * 2006 $1.2 billion * 2007 $1.8 billion * 2008 $2.6 billion * 2009 $3.9 billion * 2010 $5.7 billion The December 31, 2010 audited financial statements reported Sino-Forest had: * $5.7 billion of assets * $2.4 billion of liabilities * 395 million of net income

Fraud allegations

On June 2, 2011, shares in Sino Forest plummeted following the release of a negative research report by

Carson Block Carson Block is an American investor and the founder of Muddy Waters Research. Block is known for documenting and alleging fraudulent accounting practices in publicly traded Chinese companies. Early life and career Block grew up in Summit, ...

Muddy Waters Research Muddy Waters Research LLC is an American privately held due diligence based investment firm that conducts investigative research on public companies while also taking investment positions that reflect their research. The firm has exposed accounti ...

, which made allegations that Sino-Forest had been fraudulently inflating its assets and earnings, and that the company's shares were essentially worthless. Muddy Waters claimed that Sino Forest was a "multibillion-dollar

Ponzi scheme A Ponzi scheme (, ) is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors. Named after Italian businessman Charles Ponzi, the scheme leads victims to believe that profits are comin ...

" that was "accompanied by substantial theft". Sino Forest rejected the allegations of fraud and launched an independent investigation by

PricewaterhouseCoopers PricewaterhouseCoopers is an international professional services brand of firms, operating as partnerships under the PwC brand. It is the second-largest professional services network in the world and is considered one of the Big Four accounting ...

.Canadian regulators order Sino-Forest executives to resign
- DealBook/New York Times, 26 Aug 2011 Shares in Sino Forest fell by 82% following publication of the Muddy Waters report, with prominent investor

John Paulson John Alfred Paulson (born December 14, 1955) is an American billionaire hedge fund manager. He leads Paulson & Co., a New York-based investment management firm he founded in 1994. He has been called "one of the most prominent names in high fina ...

selling his entire stake in the company at a $720 million loss. On June 30, debt rating agency

Standard & Poors S&P Global Ratings (previously Standard & Poor's and informally known as S&P) is an American credit rating agency (CRA) and a division of S&P Global that publishes financial research and analysis on stocks, bonds, and commodities. S&P is consi ...

downgraded Sino-Forest's long-term

corporate credit rating In investment, the bond credit rating represents the credit worthiness of corporate or government bonds. It is not the same as an individual's credit score. The ratings are published by credit rating agencies and used by investment professiona ...

from "BB" to "B+". A second downgrade to "B" followed on August 23. On August 15, 2011, Sino-Forest announced that the results of the PwC probe into the allegations would be delayed to the end of the year due to difficulties in gathering data from the Chinese companies involved.

Suspension of Trading of Shares

On August 26, 2011, the

suspended trading of the shares of Sino-Forest, stating that the company had engaged in practices they "knew or should have known" perpetuated a fraud. The OSC also initially ordered that five directors of Sino-Forest resign, but rescinded this demand a few hours later as the Ontario Securities Act does not allow the commission to summarily force the resignation of a company director without a hearing.

Bankruptcy Protection

On March 30, 2012, Sino-Forest filed for bankruptcy protection in Canada under the framework laid out in the ''

Companies' Creditors Arrangement Act The ''Companies' Creditors Arrangement Act'' (CCAA; french: Loi sur les arrangements avec les créanciers des compagnies) is a statute of the Parliament of Canada that allows insolvent corporations owing their creditors in excess of $5 million to ...

''. On April 4, 2012, Sino-Forest's auditors,

Ernst and Young Ernst & Young Global Limited, trade name EY, is a multinational professional services partnership headquartered in London, England. EY is one of the largest professional services networks in the world. Along with Deloitte, KPMG and Pricewaterh ...

, resigned.

Defamation Lawsuit

On March 29, 2012, one day before filing for bankruptcy protection, Sino-Forest sued Muddy Waters in the

Ontario Superior Court of Justice The Superior Court of Justice (French: ''Cour supérieure de justice'') is a superior court in Ontario. The Court sits in 52 locations across the province, including 17 Family Court locations, and consists of over 300 federally appointed judges. ...

for defamation. Sino-Forest sought damages of $4 billion. In response to the lawsuit, Muddy Waters stated that Sino's bankruptcy protection filing vindicated its accusations since the company would not require bankruptcy protection if it was really generating close to $2 billion in cash flow.

Settlement of Investors' Lawsuits

In 2015, the firm's auditors

, a group of financial institutions (Credit Suisse Securities (Canada) Inc., TD Securities Inc., Dundee Securities Corp., Merrill Lynch Canada Inc., RBC Dominion Securities Inc., Scotia Capital Inc., CIBC World Markets Inc., Canaccord Financial Ltd. and Maison Placements Canada Inc.), and former Sino-Forest chief executive David Horsley paid $117 million, $32.5 million and $5.6 million respectively to settle investor's lawsuits.

Ontario Securities Commission Decision

On July 13, 2017, the OSC released its decision finding that "Sino-Forest, Chan, Ip, Hung and Ho engaged in deceitful or dishonest conduct related to Sino-Forest’s standing timber assets and revenue they knew constituted fraud." The OSC also found that the individual respondents violated Ontario securities law by misleading commission staff during the investigation.

Bankruptcy protection proceedings

A Plan of Compromise and Reorganization was approved by the court on 10 December 2012, which is expected to come into effect on 17 January 2013. It is now controlled by its bondholders and operating as Emerald Plantation Holdings based in Hong Kong.

References

External links

Sinoforest.com: official Sino-Forest Corporation websiteSinoforest.com: company profile
{{Authority control Forest products companies of China Accounting scandals Corporate scandals Fraud in Canada Chinese companies established in 1994 Renewable resource companies established in 1994 Chinese companies disestablished in 2012 Canadian companies disestablished in 2012 2011 scandals 2012 scandals 2012 crimes in Canada Defunct companies of China Forest products companies Companies that have filed for bankruptcy in the People's Republic of China