"Chinese private companies tend to not be very transparent and we've had bad experience in the past where accounts are not reliable and the companies' conduct not very ethical after they go public."The Carlyle Group took China Forestry public in November 2009, when Reuters reported:
China Forestry Holdings Group, a forestry plantation operator backed by the Carlyle Group [CYL.UL], priced its initial offering of shares near the top of an indicative range, raising HK$1.55 billion ($200 million), a source involved in the deal said on Wednesday.Did investors rely on fraudulent financial information in the prospectus? This isn't the first time Carlyle got hoodwinked by an affiliate. SemGroup, a staid energy pipeline company, imploded from bad energy bets. SemGroup's SEC filings make no mention of such "investments." Louis Freeh conducted the investigation into the SemGroup debacle.
China Forestry's investigation is ongoing. KPMG stated last year there was "serious doubt over the authenticity and reliability of records and documents of the group."
The investigation should "identify all irregularities that may have occurred and all management and officers involved in the irregularities, trace where the group spent the proceeds from the initial public offering and reconcile the details of recorded plantation assets."
What about Carlyle's proceeds from the IPO? I smell clawback and lawsuits. Carlyle knows how to vigorous defend itself.