A multinational agricultural company has agreed to pay $3 million to settle charges that it concealed substantial losses from investors through fraudulent accounting in connection with its divestiture of its primary operating entity. In a related action, the company’s executive chairman Lai Guanglin (aka Alan Lai) settled charges that he manipulated the company’s share price.
As described in the SEC’s order, Agria Corporation sold its Chinese operating company in return for stock and land use rights to 13,500 acres of undeveloped land in a remote, mountainous area of China’s Shanxi Province. The SEC order found that Agria overstated the value of the stock it received by $17 million and assigned a value of nearly $60 million to the effectively worthless land use rights. A separate SEC order found that in March 2013, Lai used nominee brokerage accounts to engage in manipulative trading in Agria’s American Depository Shares in order to inflate their price above $1 and prevent the securities from being delisted by the New York Stock Exchange.
“Agria’s fraudulent accounting hid from investors the significant loss it sustained when it divested its principal operation in China, and Mr. Lai artificially inflated the share price to maintain Agria’s NYSE listing,” said Charles E. Cain, Chief of the SEC Enforcement Division’s FCPA Unit. “Disclosure of accurate information is vital to the integrity of our markets, and both Agria and Mr. Lai have been appropriately held to account for their deceptive misconduct.”
The SEC’s order found that Agria violated antifraud, reporting, books and records and internal accounting control provisions of the federal securities laws. Without admitting or denying the findings, Agria agreed to pay a $3 million penalty and cooperate with the Commission’s staff in future investigations. The SEC’s order as to Lai found that he violated antifraud provisions of the federal securities laws. Without admitting or denying the findings, Lai agreed to pay a $400,000 penalty and be barred for a period of five years from acting as an officer or director of any public company.
The SEC’s investigation was conducted by David Kagan-Kans, Michael Catoe, M. Shahriar Masud, and Kristen Dieter, and supervised by Robert I. Dodge. The SEC appreciates the assistance of the New York Stock Exchange Regulation and the Financial Industry Regulatory Authority.
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