Sino-Forest JV exposed as shell

Sino-Forest (TRE.TSE) reported US$60 million in sales from a wood panel joint venture that never produced a single piece of building material, the Globe and Mail reported, citing a former executive from the Chinese forestry company. “The [US$60-million in sales] information must be incorrect,” said Qi Shuxiong, a former Sino-Forest director who retired in 2003, said in an interview. “There was no warehouse or factory … It was only in the planning stage.” Sino-Forest initially invested US$1 million in the company, called Zhanjiang Leizhou Eucalyptus Resources Development, but the joint venture came to an abrupt halt in 1995 before it could start generating revenues. Sino-Forest has become embroiled in a stock fraud scandal and its shares have lost 67% of their value since June, when short-seller firm Muddy Waters alleged that the company had exagerated its forestry holdings. On August 26, the Ontario Securities Commission suspended trading of the company’s stock, saying that some of its executives appeared to have engaged in activities that perpetuated fraud. Sino-Forest Chairman and CEO Allen Chen announced his resignation two days later.