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Chinese Company Blames Upcoming Default On Gangsters, Mysterious Loss Of "Important Documents"

Tyler Durden's picture




 

Two days ago we said that the explanation provided by China's latest corporate fraud, China Animal Healthcare, for "losing" its books, may well be the greatest official reason provided by a management team for cooking the books.

As we summarized, "China Animal Healthcare said in a statement to the Hong Kong stock exchange that a truck loaded with four years’ worth of its original financial documents was on its way to Beijing. However, while the truck driver was taking a lunch break, the truck was stolen. One week later the truck was found... but the four years of financial documents were gone."

Today we encounter another insolvent Chinese company (one which soon be revealed as the next in a long series of mainland corporate frauds) Shandong Shanshui Cement Group, which is the domestic subsidiary of Hong Kong-listed China Shanshui Cement Group, and which defaulted on a bond payment in November. It is about to default again after earlier this week the company said "it was at risk" of defaulting on another bond for 1.8 billion yuan, maturing on Jan 21, 2016.

Here, however, an unusual twist emerges: it appears that the latest default notice may have been "unauthorized"... because as usually happens with insolvent frauds caught in a death spiral, there is a suspenseful back story.

As the WSJ writes, eight of China Shanshui's directors were removed earlier in December in a power struggle after Tianrui Group gained control of Shanshui’s board.

The removed directors include Zhang Bin, formerly Shanshui’s chairman and general manager and the son of company founder Zhang Caikui.

 

The struggle started when Tianrui Group—also the largest shareholder of another Hong Kong-listed company, China Tianrui Group Cement Co. Ltd.—gained control of Shanshui by successfully buying a stake even larger than the Zhang family.

 

Tianrui, with its 28.16% stake, took control of the Shanshui board at an extraordinary general meeting on Dec. 1. It immediately ousted eight directors who were mainly representatives from the second-largest shareholder, the Zhang family.

 

Two days later, Shanshui said it had given instructions to its legal adviser to start proceedings against Zhang Caikui and Zhang Bin in connection with “alleged unlawful course of conduct and breach of fiduciary duties,” but it didn’t disclose details.

It gets better: "A person speaking for Shanshui said Wednesday that some departments of its major operating unit, Shandong Shanshui Cement Group, were still “illegally occupied” by former management. Moreover, the cement unit has issued what the person speaking for the company described as an “unauthorized” notice of default of certain bonds."

As noted above, Shanshui, which earlier defaulted on a two billion yuan ($308 million) onshore bond on Nov. 12, warned Tuesday night that it may default on the onshore bond due in three weeks as "some of its bank accounts and assets were frozen due to lawsuits against the company" according to a statement posted on Chinabond, one of China’s main bond clearinghouses.

"But the person speaking for Shanshui said that statement wasn’t authorized."

Wait, what? 

“We haven’t authorized the issuance of the statement,” the person said, adding that all the company’s formal statements were issued via the Hong Kong stock exchange.

 

The person speaking for Shanshui said the company has “adequate funding” for interest payments of all its outstanding debts, include both onshore and offshore.

So if has adequate funding, why not just pay the defaulted obligations then? And therein lies the rub.

It turns out that in an almost identical incident to China Animal Healthcare, the company mysteriously "misplaced" its books, only the the reason was far less creative: the company's new board and management said it is unable to repay its outstanding obligations immediately due to "technical reasons" namely that they are unable to locate certain books, records and important documents at this stage—the items Shanshui says may be stolen.

But one can't just "lose" the company's "books, records and important documents" - there has to be a reason. For that we go to the filing posted overnight by the company in which it lays out the "culprit.

In the PDF, we first read the details of the document "loss", namely that:

"the Commercial Crime Bureau of the Hong Kong Police (the “CCB”) has taken up the report of the Company regarding the loss of certain books, records, important documents and electronic data in the Company’s principal place of business (details of the complaint are contained in the Announcement)."

... followed immediately by Shanshui's version of the "dog stole my truck and kept the secret documents" excude:

Despite the cooperation and assistance of the Jinan Municipal People’s Government (the “Jinan Government”), it was reported by Shandong Shanshui that Chen Xueshi, a former director of Shandong Shanshui, together with a group of gangsters, barged into the Headquarters by force on 27 December 2015, destroyed the properties in the offices therein and assaulted the employees of Shandong Shanshui.

 

The matter was instantly reported to the local police and the Jinan Government. Chen Xueshi and the gangsters were taken by the local police for questioning and investigation.

So it was the gangsters' fault the company's financial records are missing? One can only hope the police questioning will make them reveal just what was in the now surely hopelessly lost key financial records.

Chinese gangsters, stock photo, mdp.com

To summarize: a perfectly non-fraudulent Chinese company would have easily made its upcoming bond payment (because it clearly has the adequate funding) if only it were able to "locate certain books, records and important documents", records which may have been "destroyed" when a former director together with a group of gangsters barged into the company's office and assaulted employees.

We can't wait when bizarro fraud such as this one finally crosses the Pacific and lands at some junk bond issuer/buyer in the US where the resulting drama will make for weeks of tragicomic realty TV to fill the void left from the accelerated arrest of Martin Shkreli.

 

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Thu, 12/31/2015 - 13:39 | 6982341 NotApplicable
NotApplicable's picture

Long gangsters.

Thu, 12/31/2015 - 13:41 | 6982349 Looney
Looney's picture

Shandong Shanshui got Schlonged  ;-)

Looney

Thu, 12/31/2015 - 13:59 | 6982431 KesselRunin12Parsecs
KesselRunin12Parsecs's picture

So these are the dogs that ate Hilary's e-mails?

Thu, 12/31/2015 - 14:36 | 6982616 Ghost of PartysOver
Ghost of PartysOver's picture

But, but, bit China was supposed to lead the world economic recovery.   Looks like another unicorn take a rainbow up the arse for a serious schlonging.

Fri, 01/01/2016 - 14:28 | 6985677 Laowei Gweilo
Laowei Gweilo's picture

Long Wang

Thu, 12/31/2015 - 14:37 | 6982620 insanelysane
insanelysane's picture

Apparently businesses and banks in China are still using paper records.  I am pretty sure 3rd world businesses and banks run on computers.  Maybe Staples should open a few stores and sell mimeograph machines.

Thu, 12/31/2015 - 13:41 | 6982353 trulz4lulz
trulz4lulz's picture

Those arent gangsters. Early 20th century American gangsters wouldnt tell these guys to make them a sammich.

Thu, 12/31/2015 - 13:44 | 6982362 KnuckleDragger-X
KnuckleDragger-X's picture

They are the best they could come up with on short notice.......

Thu, 12/31/2015 - 14:03 | 6982437 KesselRunin12Parsecs
KesselRunin12Parsecs's picture

Everybody was Kung Fu Fightin'!

 

"There was funky Billie Chin and little Sammy Chong
He said, here comes the big boss, let's get it on
We took the bow and made a stand
Started swaying with the hand
A sudden motion made me skip
Now we're into a brand new trip"

Thu, 12/31/2015 - 15:41 | 6982969 css1971
css1971's picture

Kung-Fu is just another form of Chinese fraud. It's endemic.

To give you some background, Chinese based martial arts transmit the information about how the martial art system works through "forms". These are the complex series of dance like movements, often tens to hundreds of movements in length that you see the practitioners perform.

The problem is that only a tiny percentage of martial arts teachers (has to be 5% or less) understand how to interpret these forms and read the techniques and principles that the forms contain and even if your teacher does understand how to do this, it doesn't guarantee that he's going to teach it to you. All the rest of them quite literally just make shit up. It's been going on for centuries. All the films you see where they talk about someone's kung-fu being weak or strong this is what they're talking about. Do you know the real techniques, or have you been learning made up crap for a decade or two? Pretty much everything you see in any movie is garbage.

In most cases, practitioners will believe what they're learning is the real thing, even the teachers will believe theiy are teaching the real thing when in fact it's made up rubbish. This is why for example Bruce Lee came to the west to learn western martial arts, his Chinese teachers were not teaching him the real techniques.

So I advise people to avoid all Chinese martial arts; any kung-fu style and popular derivatives of the Chinese arts; Karate, Tae Kwon Do and Tang Soo Do etc.

Thu, 12/31/2015 - 18:04 | 6983561 Dugald
Dugald's picture

         Karate, Tae Kwon Do and Tang Soo Do etc.

      Waste time....

 Smith and Wesson and Mr Colt are way faster

 

Fri, 01/01/2016 - 08:26 | 6984871 css1971
css1971's picture

Actually not. The real methods will end a fight in 2-3 seconds. All the movie crap of fights going on for minutes is just entertainment.

Also the range that you would need to use an unarmed combat system is not a range you'd want to be trying to pull a gun out of a holster. 18" or so. By all means learn to use both.

Thu, 12/31/2015 - 14:02 | 6982450 Winston Churchill
Winston Churchill's picture

My new puppy ate my building permit yesterday.

Half an hour before the inspection.True or false ?

Thu, 12/31/2015 - 14:42 | 6982647 KesselRunin12Parsecs
KesselRunin12Parsecs's picture

yes

Thu, 12/31/2015 - 15:30 | 6982916 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

false, puppies don't eat paper & ink. They might chew it and drag it around a bit, but they won't eat the whole permit. Moreover, with the Building Inspector due in half an hour the Builder would have that permit sitting on the counter in the kitchen, or it would be in a briefcase in the truck that is parked onsite. Lastly, puppies are not permitted on the job site because puppies are naturally stupid like Alan Greenspan, Tim Geithner, Ben Bernanke, and Hank Paulson et al.

 

 

Thu, 12/31/2015 - 13:47 | 6982377 Uncle Tupelo
Uncle Tupelo's picture

Sum Ting Wong?

Thu, 12/31/2015 - 13:48 | 6982382 _ConanTheLibert...
_ConanTheLibertarian_'s picture

Hired gangsters?

Thu, 12/31/2015 - 13:51 | 6982396 Pliskin
Pliskin's picture

China hating Tyler needs to get out more...Chinese gangsters, these fucking guys, are you kidding me? 

I've done business with Chinese gangsters, I've been robbed by Chinese gangsters and I've been beaten to inches of my life by Chinese gangsters...and I'm telling you, these aren't Chinese gangsters..

Try the Brazilian brothel on Yuyuan Road in Shanghai....Gangsters, you don't fucking know gangsters dude....

 

Thu, 12/31/2015 - 13:57 | 6982426 trulz4lulz
trulz4lulz's picture

All of what you said almost sounds like good times were had!!

Thu, 12/31/2015 - 14:18 | 6982530 yovatti
yovatti's picture

Brazilian chicks are bad news. I once met a group of Brazilian girls in a bar in Japan. After several drinks, I foolishly followed them to their "Brazilian bar"several doors down. It was an African clip joint. I was saved only by the fact that my wallet was nearly empty anyway. Now those were some pissed off African gangsters. And the fucking Japanese cops were bought and paid for, and didn't want to hear about it.

 

I'm going to Sao Paulo in February - and after this experience, I am totally keeping it in my pants.

 

Thu, 12/31/2015 - 14:22 | 6982546 GhostOfDiogenes
GhostOfDiogenes's picture

I met some Brazilian chicks in LA one time waiting for my lawover to Hawaii.

They were nice.

I have never had any problems with any gangsters except the kosher and .gov highwaymen.

Thu, 12/31/2015 - 15:23 | 6982888 ebear
ebear's picture

That's nothing! I hooked up with this Brazilian chick in a bar, took her back to my hotel room where I passed out, and three hours later woke up in a bathtub full of ice water missing a kidney.

She did leave a note though, so it wasn't all bad.

Fri, 01/01/2016 - 18:53 | 6986449 mkhs
mkhs's picture

You damn 1%ers always bragging about your note; they took my kidney and all I got was this scar.

Thu, 12/31/2015 - 15:32 | 6982920 bid the soldier...
bid the soldiers shoot's picture

ho ho

 I am totally keeping it in my pants.

yours is so tiny that it won't be very hard to do

(if you don't mind a wee pun)

Fri, 01/01/2016 - 18:54 | 6986452 mkhs
mkhs's picture

A little French humour, wee?

Thu, 12/31/2015 - 14:20 | 6982534 GhostOfDiogenes
GhostOfDiogenes's picture

I have banged a few chinese independent gangsters.

I have never really had problems with other gangtsers.

But you have to watch out for criminal government gangsters getting away with murder.

http://mobile.nytimes.com/2015/12/29/us/tamir-rice-police-shootiing-clev...

Whoops. Accident.

Its an accident when cops react like their IDF training dictates and they kill kids with obvious pellet guns.

Thu, 12/31/2015 - 17:06 | 6983368 Raging Debate
Raging Debate's picture

But was visiting the brothel worth it? Enquiring minds want to know. 

Thu, 12/31/2015 - 13:57 | 6982419 Possible Impact
Possible Impact's picture

Kung Fu Panda did it...

Thu, 12/31/2015 - 14:00 | 6982434 grunk
grunk's picture

I blame the weather.

Thu, 12/31/2015 - 14:12 | 6982503 yovatti
yovatti's picture

 

Where did they get the "gangsters"? At a gay disco?

 

Thu, 12/31/2015 - 14:22 | 6982547 silverer
silverer's picture

Those are victims.  Gangsters stole their shirts.

Thu, 12/31/2015 - 14:21 | 6982540 silverer
silverer's picture

Dear China, 

   Everyone has gangstas.  Get used to it.

Thu, 12/31/2015 - 14:23 | 6982548 Elliptico
Elliptico's picture

Goldman Sachs junior bankers?

Thu, 12/31/2015 - 15:49 | 6983020 Joebloinvestor
Joebloinvestor's picture

Just like Cyprus, A "trial balloon" to see if this kind of BS will float.

I thought adequate record retention was a cornerstone of trust.

 

Thu, 12/31/2015 - 17:40 | 6983492 commie
commie's picture

China and russia are going to be the dominrant players coming up. Right!

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