Chinese Company Juggled the Books, SEC Says

WASHINGTON (CN) - RINO, a Chinese holding company, reported $491 million in income to the SEC while its Chinese books showed just $31 million, and its top officers siphoned off millions, the SEC claims in court.

The SEC sued RINO International Corp., its CEO Dejun "David" Zou, and his wife, Chairwoman of the Board Jianping "Amy" Qiu, for securities fraud and aiding and abetting, in Federal Court.

RINO is a holding company for subsidiaries that make, install and maintain wastewater treatment and flue gas desulphurization for the Chinese steel industry. Zou and Qiu owned at least 65 percent of its stock during the relevant period, from FY 2008 through the first three quarters of 2010.

They kept two sets of books: one for China and one for the United States, the SEC claims.

"The Chinese books reflected sales of approximately $31 million for the period," while "the U.S. books for the same period reflected sales over 15 times that amount, or approximately $491 million," the SEC says in the complaint.

Zou and Qiu knew the U.S. books were false, or were reckless in not knowing it, the SEC says.

After a 2009 securities offering, Zou and Qiu used some of the money "to purchase a $3.5 million home, cars, and designer clothing and accessories," according to the complaint.

Zou, who founded RINO and owns nearly 60 percent of its stock, lives in China. His wife lives in China and Orange County, Calif.

As is often the case with Chinese stock frauds, RINO was created by a reverse merger: buying an empty corporate shell, to avoid U.S. registration requirements, the SEC says in the complaint. Its 2009 securities offering aimed at sucking up $150 million, and it reported raising nearly $100 million. The defendants wired $90 million to China and used $10 million to maintain a presence in the United States, the SEC says.

It seeks disgorgement and penalties for securities violations and aiding and abetting.

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