US is probing Chinese firms

Marion Dakers
CHINESE stocks listed in the US plunged last night after an official said the justice department is probing accounting irregularities at such firms.

Criminal and civil charges could be brought as a result of the investigation, suggested Robert Khuzami, director of enforcement at the Securities and Exchange Commission.

“There are parts of the Justice Department that are actively engaged in this area,” he said yesterday.

The Nasdaq was dragged lowered by a brutal sell-off of Chinese companies, with internet search engine Baidu falling 9.2 per cent and Sina Corp shedding 9.7 per cent. No individual firms have been named as part of the investigation.

The SEC’s review of accounting problems at foreign-based stock issuers sharpened its focus earlier this year when dozens of China-based companies began disclosing auditor resignations or book-keeping irregularities.

Deloitte resigned as auditor of Chinese software company Longtop Financial Technologies in May, saying it had found falsified financial records and bank balance confirmations.

But the SEC has struggled to gain access to documents it needs because strict Chinese laws have made auditors reluctant to turn them over.