Stock movements within the Shanghai Stock Exchange on September 22, 2015.
In a recent development in the financial fraud case of major Chinese pharmaceutical listed company Kangmei Pharmaceutical, the company’s financial statement auditor has been heavily fined by the Communist Party’s Securities Regulatory Commission. In its 2018 annual report alone, Kangmei Pharmaceutical was involved in financial falsifications of nearly RMB 90 billion.
The website of the China Securities Regulatory Commission (CSRC) recently issued an administrative penalty decision against Guangdong Zhengzhong Zhujiang Accounting Firm (“Zhengzhong Zhujiang”).
According to the decision letter, the CSRC decided to order Zhengzhong Zhujiang Accounting Firm to make corrections and forfeit RMB 57 million, and to warn Yang Wenwei, Zhang Jingli and Su Chuangsheng and impose a fine of RMB 100,000 each, and to warn Liu Qing and impose a fine of RMB 30,000.
In addition, the SFC also issued market entry bans to Yang Wenwei, Zhang Jingli and Su Chuangsheng.
The Daily Economic News reported that Zhongzheng Zhujiang is the auditor of the 2016-2018 annual financial statements of Kangmei Pharmaceuticals Co. project manager for the annual audits of 2016 and 2017.
(hereinafter referred to as “Kangmei Pharmaceutical”) was established in 1997 by Ma Xingtian, the founder of Kangmei Pharmaceutical. The company is currently a large pharmaceutical company with a leading production of Chinese traditional Medicine tablets, chemical raw materials and preparations, and was listed on the Shanghai Stock Exchange in 2001.
The founder was taken away and the market value shrunk by 90%
It is worth noting that previously, Kangmei Pharmaceuticals has been under market scrutiny for repeated information disclosure violations.
In the evening of July 9, 2020, Kangmei Pharmaceuticals issued an announcement that it had received notification from the Family of Mr. Ma Xingtian, the company’s de facto controller, that Mr. Ma Xingtian had been taken into compulsory measures by the public security authorities for the crime of irregular disclosure and disclosure of material information.
According to the national enterprise credit information disclosure system, on July 2, 2020, ST Kangmei underwent a business change, with Ma Xingtian stepping down as legal representative and Ma Xinggu taking over. The announcement shows that Ma Xingtian has not held any position in the company since May 2020.
According to Brokerage China, in the early stage of the company’s development, Kangmei successfully developed a variety of new drugs. In 2001, with the performance of new drugs, Ma Xingtian successfully pushed Kangmei Pharmaceuticals to go public. Three years later, Ma Xingtian became the richest man in Jieyang with a value of $41 billion.
It is worth noting that previously, ST Kangmei has been under market scrutiny for repeated information disclosure violations.
In August 2019, the Communist Party of China Securities Regulatory Commission (CPCSC) issued an administrative penalty notice to Kangmei Pharmaceuticals, and according to the findings in the notice, the investigation by the CPCSC showed that from 2016 to the first half of 2018, the operating profit was inflated by 3.936 billion yuan in two and a half years, accounting for one-third of the announced operating profit in the same period.
Meanwhile, Kangmei Pharmaceutical falsely recorded in its 2018 annual report an inflated fixed assets, construction in progress and investment properties, totaling 3.6 billion yuan. It also falsely increased monetary funds by a total of RMB 88.681 billion through financial non-bookkeeping and false bookkeeping, forging and fabricating large term deposit slips or bank statements, and falsifying sales returns in conjunction with operating income falsifications.
After the financial fraud case of Kangmei Pharmaceuticals was exposed in May 2019, the stock price fell continuously in a stumble, and the total market value is now only 12.7 billion yuan, shrinking by more than 90% from the high level. And there are still 180,000 shareholder households behind Kangmei Pharmaceuticals.
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