[Flashback] Tianhe hits back at fraud claims with 55-page rebuttal


Posted by LIM Hui Jie, Year 4 undergrad at the School of Economics, Singapore Management University

Tianhe Chemicals shares tumbled 26 per cent after a five­week trading suspension following allegations of accounting fraud. The Chinese chemicals group released a 55­page rebuttal of fraud claims late on Wednesday, arguing that Anonymous Analytics, a group claiming links to Anonymous, the shadowy hacker collective, “used fabricated financial statements to mislead investors”. The short­seller attack from Anonymous caused Tianhe, which had only listed in June with a market capitalisation of about $8bn, to suspend its shares on September 2.

The FT’s Jennifer Hughes reported that the attack was the most high­profile since new Hong Kong listing rules introduced last year made banks sponsoring, or leading, initial public offerings potentially liable for offences relating to misinformation in prospectuses. Tianhe’s sponsors were Morgan Stanley, UBS and Bank of America Merrill Lynch.

Here’s a summary of the rebuttal provided by Tianhe:

We do not have two sets of books as alleged by the reports.

The Jinzhou DPF­TH accounts for 2011 and 2012 filed with the local AICs were the financial statements issued by the company and audited by Moores Rowland and Deloitte respectively.

The reports used fabricated financial statements to mislead investors.


We have paid all taxes we were liable to pay during the track record period.

The PRC tax authorities have issued a confirmation that we have paid all taxes due and we have no tax dispute with the PRC tax authorities.

All income tax paid amounts shown in our tax filings, accounting records, tax receipts, historical audited financial statements, tax confirmations issued by the local tax bureaus and the accountants’ report are consistent.

We will make available all income tax and VAT receipts during the track record period for inspection by our shareholders at our principal office in Hong Kong.

Specialty Fluorochemical Customers

Unlike standardised products such as apparel or beverages, the application of the Company’s specialty fluorochemical products may need to be chemically tailored to an end­customer’s product formulation, which may need further processing by the trading companies (the trading companies may possess professional chemical processing capability and may need to further process our specialty fluorochemical products to suit their end­customer’s specific needs). Completing a sale requires iterative technical interactions and deep existing understanding of an end­customer’s chemical requirements, which are functions typically provided by trading companies for the end customers.

Over the past decade, we have been primarily focused on developing the technologies to produce the products we sell rather than on the sales capability.

We have and will continue to work with trading companies which have extensive experience and customer networks, while we gradually build our own sales team and complete direct sales with major multinational customers. Currently, most of our major customers of specialty fluorochemicals are trading companies.

The major customers for our specialty fluorochemical products are CITIC International, Shanghai Xidatong, Shanghai Top and Heilongjiang Taina. They are not our “connected persons” and are independent of the Company.

The sales to these customers are genuine. The company emphasise that its transactions are conducted on normal commercial terms and are on an arm’s length basis and the group generally requires customers to make payments prior to delivery of relevant products.


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