Sino-Forest: Probe disproves Muddy Waters' allegations

Chinese timber company Sino-Forest Corp (TRE.TSE) said that an independent committee had refuted the “substance” of fraud allegations that have deflated its share price 74% since they emerged in June, Bloomberg reported. In contrast to claims made by Carson Block’s research firm Muddy Waters, the committee confirmed that the company’s timber assets, cash balance and titles were basically correct, though it wasn’t able to verify the value of its forestry holdings or reconcile some revenue, Sino-Forest said in a statement. Since the Muddy Waters report was released, Sino-Forest has lost US$5.7 billion in market value, at least US$3.2 billion of which was held by hedge-fund firm Paul & Co. The report refuting the fraud, which was prepared with the assistance of PwC, wasn’t enough to “erase concerns over this kind of company,” said Tsuyoshi Shiba, the chief investment officer of Hong Kong-based Triskele Capital Management. “We are shunning these companies because there is not enough information.”