China Integrated Energy (CBEH): Alleged (Repeat) Chinese Fraud Du Jour

Tyler Durden's picture

Another day, another imminent perpetual trading halt of a Chinese reverse merger or some other imported domestically listed scam. Today's target (which is not new to adverse research reports - recall that Upton Sinclar Research recently present a comparable fraud case recently), per Alfred Little research, is Chinese company China Integrated Energy (CBEH), which Alfred Little spares little kinds word for: "China Integrated Energy, Inc. (NASDAQ: CBEH) is a complete hoax, according to a detailed investigation by the International Financial Research & Analysis Group (“IFRA”) commissioned by one of its hedge fund clients." Considering all the other words previously lashed out at CBEH, this may be one of the less scathing reports we have seen out there. That said, there is little to look forward to for stockholders per this report, as Alfred Little concludes "CBEH shareholders will almost certainly ecover nothing."

Key highlights from the report:

1. Four months nearly continuous on site observation and video surveillance of CBEH’s biodiesel operations in Xi’an (Tongchuan) confirm no meaningful production activity, completely demolishing management’s repeated claims the plant is running at 100% of capacity and generated $22,876,791 gross profit in 2010. On March 10, 2011, investigators caught and filmed CBEH management “redhanded” staging phony production activity at the factory with the criminal intent to defraud a group of 20 investors touring at the expense of CBEH’s investment bank, Rodman & Renshaw (NASDAQ: RODM).

2. Three months of on-site and video surveillance of CBEH’s recently acquired Chongqing Tianrun biodiesel plant confirm no meaningful production activity, either; completely contrary to management’s claims the plant is running at 100% of capacity since January

3. The largest PRC auditor performed an independent audit of CBEH’s 2009 financial statements showing no revenue from biodiesel sales while gross profit from its wholesale and retail diesel division was 46% lower than reported in its 2009 10-K filing.

4 The 100,000-ton Tongchuan biodiesel production line never even bothered to obtain a production license, which is absolutely required before it can sell any biodiesel. Nor does the Tongchuan 100,000-ton plant have any meaningful access to feedstock (waste or vegetable oils) or advanced technology as management claim.

5. Despite no meaningful production of biodiesel in its history and with little more than scrap value attributable to its idle plants, CBEH management falsely claims in its SEC filings that it invested $46.1 million acquiring and building out these totally unproductive assets over the last 5 years. Additionally, CBEH has announced it will spend another $46 million acquiring and building out its new Hainan plant in 2011.

6. In addition to greatly exaggerating the earnings of its wholesale and retail divisions, CBEH management falsely claims in its SEC filings it spent $53.2 million acquiring and leasing these assets over the last three years. It projects to spend another $8.2 million on Chongqing FengDou Keyu acquisition in 2011.

7. CBEH’s ongoing and continuous hoax allowed it to raise $85 million from investors to date, including $39.5 million most recently with the help of its investment banker Rodman & Renshaw (NASDAQ: RODM). The ongoing fraudulent acquisitions and capital expenditures combined with a legally unenforceable VIE structure in China ill result in a total loss for U.S. investors.

Much more in the full report which obviously does not see the company as continuing much longer as a going concern.

CBEH Alfred Little