The aftershock of Kangmeis fraud: claims from senior executives or punished investors are on the way

category:Finance
 The aftershock of Kangmeis fraud: claims from senior executives or punished investors are on the way


A number of securities rights protection lawyers told the first financial reporter that senior executives involved in St Kangmei may be subject to criminal punishment, and civil claims have been initiated. It is expected that the claim scale will be large. However, there are disputes on the disclosure date of St Kangmeis false statements in the industry at present, but most of the claim conditions are tentatively determined to buy st Kangmeis shares or bonds from April 20, 2017 to December 29, 2018 Of the damaged investors.

In the May 15 national Investor Protection Publicity Day activity, chairman Yi Huiman of the CSRC said, for the case that the illegal act did happen before the implementation of the new securities law and is still in the stage of investigation and trial, we will adhere to the administration according to law and implement the legal provisions when the illegal act occurs, but we will implement the spirit of the new securities law, deal with it strictly and seriously, and pay close attention to it at the same time We will promote the clean-up of accumulated cases. We will strictly punish those illegal acts that started before March 1 but are still happening and causing serious harm in strict accordance with the provisions of the new securities law.

At the same time, Yi Huiman said that he would maintain zero tolerance for vicious violations such as financial fraud, purify the market ecology and further rely on the market. By promoting the establishment of a self-discipline management, daily supervision, inspection and punishment, criminal accountability, collective action and civil compensation organic link, authoritative and efficient capital market law enforcement system.

The end of fake white horse

According to the determination of CSRC, from 2016 to 2018, St Kangmei falsely increased a large amount of operating revenue, falsely increased monetary funds by means of forging and altering large amount of fixed deposit certificates, incorporated engineering projects that did not meet the accounting recognition and measurement conditions into the statements, falsely increased fixed assets, etc. At the same time, St Kangmei has the situation that the controlling shareholders and their related parties occupy the funds for non operating purposes. The above behaviors result in false records and major omissions in the relevant annual reports disclosed by Kangmei pharmaceutical.

Second, monetary funds were inflated. In 2016, 2017 and 2018, monetary funds were inflated by 22.549 billion yuan, 29.944 billion yuan and 36.188 billion yuan respectively, accounting for about 40% of the total assets of the current period, accounting for 76.74%, 93.18% and 108.24% of the net assets of the current period.

Third, the six projects included in the 2018 annual report adjustment table do not meet the accounting recognition and measurement conditions. They falsely increase fixed assets by 1.189 billion yuan, construction in progress by 401 million yuan and investment real estate by 2.015 billion yuan.

Fourth, from January 1, 2016 to December 31, 2018, St Kangmei provided non operating capital of 11.619 billion yuan to the controlling shareholders and their related parties for purchase of shares, repayment of financing principal and interest for the controlling shareholders and their related parties, advance of pledge and deposit or payment of Acquisition Premium without decision-making approval or authorization procedures, but the corresponding three annual reports were not provided as required Disclosure of this connected transaction.

As a result, St Kangmeis market value was reduced from 100 billion to 2 yuan, leaving only 14 billion yuan. Now the latest share price is 2.82 yuan / share, only a fraction of the highest price in history.

On December 28, 2018, St Kangmei received the notice of filing investigation from CSRC due to suspected illegal information disclosure. Since then, there has been a brief rise in the market. But the companys share price plummeted again after the exposure of the virtual increase of nearly 30 billion currency funds.

In addition, it is worth noting that st Kangmei does not seem to have changed its ways. On May 10 this year, St Kangmei announced that the company and its executives had received the warning letter from Guangdong Securities Regulatory Bureau due to the violation of Xinpi. On January 23 this year, the company disclosed that the expected net profit loss in 2019 is about - 1.35 billion yuan to - 1.65 billion yuan, but on April 30, the company disclosed that the net profit in 2019 was revised to - 3.648 billion yuan, with significant changes. The information disclosure related to the performance forecast previously disclosed was inaccurate, but the company did not disclose the performance forecast amendment announcement in time.

Investor claims are on the way

According to the regulations before the new and old partition of the securities law, although the administrative penalty has been prescribed, the illegal cost is still low. And the criminal investigation and civil claim may make st Kangmei pay a more heavy price.

In response, Xu Feng, a senior partner of Shanghai Chuangyuan law firm, told the first financial reporter that referring to the investment precedent of Abbott and Boyuan, the relevant senior executives may be prosecuted for criminal responsibility. Song Yixin, a lawyer at Shanghai hanlian law firm, said there could be criminal penalties.

In addition, according to the securities law and the judicial interpretation of false statements of the Supreme Peoples court, listed companies are subject to the administrative penalty of CSRC for false statements, and investors whose rights and interests are damaged can file a civil compensation lawsuit to the court with jurisdiction.

In this case, it is estimated that there are many claimants, because there are many shareholders and a large number of counterfeits. It is estimated that the amount of civil claims will be over 100 million. According to song Yixin, the claimable investors include not only st Kangmeis common shareholders, but also bondholders and preferred shareholders: 15 Kangmei bonds (122354), 18 Kangmei 01 (143730), 18 Kangmei 04 (143842) and kangmeiyou 1 (360006).

Song Yixin said that according to the judicial interpretation, it is preliminarily determined that the investors who bought shares or bonds of Kangmei pharmaceutical industry from April 20, 2017 to December 28, 2018, and sold (sold back) or continued to hold shares or bonds on or after December 29, 2018, are impaired. April 20, 2017 is the disclosure date of 2016 annual report of St Kangmei, and December 28, 2018 is the filing and investigation date of CSRC.

During the period from January 2, 2018 to December 28, 2018, St Kangmeis share price changed from twenty-two point zero six Yuan down to nine point two one Yuan, down as much as 58%, halved. As of December 31, 2018, the number of shareholders of St Kangmei exceeded twenty-two point zero six 10000 households.

However, Xu Feng said that there is a big dispute on the disclosure date of St Kangmei case in the securities rights protection lawyer industry at present, because after the CSRC filed the case for investigation, there is still a fraud problem in the 2018 annual report disclosed by the company on April 30, 2019, so how to continue to make false statements after filing the case for investigation becomes a big problem. In this regard, Xu Feng tentatively proposed two investor claim conditions, one is to buy st Kangmei shares and bonds between April 20, 2017 and December 29, 2018, and sell or continue to hold them after January 1, 2019; the other is to buy st Kangmei shares between April 30, 2019 and August 17, 2019, and sell or continue to hold them after August 17, 2019. Among them, on August 17, 2019, St Kangmei announced that it had received the CSRCs administrative penalty and the prior notice of market prohibition. The specific civil claims shall be subject to the scope, standard and calculation method of compensation determined or determined by the relevant court. Source: editor in charge of the first financial daily: Guo Chenqi, nbj9931

However, Xu Feng said that there is a big dispute on the disclosure date of St Kangmei case in the securities rights protection lawyer industry at present, because after the CSRC filed the case for investigation, there is still a fraud problem in the 2018 annual report disclosed by the company on April 30, 2019, so how to continue to make false statements after filing the case for investigation becomes a big problem.

In this regard, Xu Feng tentatively proposed two investor claim conditions, one is to buy st Kangmei shares and bonds between April 20, 2017 and December 29, 2018, and sell or continue to hold them after January 1, 2019; the other is to buy st Kangmei shares between April 30, 2019 and August 17, 2019, and sell or continue to hold them after August 17, 2019. Among them, on August 17, 2019, St Kangmei announced that it had received the CSRCs administrative penalty and the prior notice of market prohibition.