Glaucus Brings The Latest Chinese Reverse Merger Fraudcap Du Jour - L&L Energy (Nasdaq:LLEN): PT < $1.00

It has been a while since we have presented Chinese fraudcap candidates. Today, courtesy of Glaucus Research we bring you the latest entrant to the alleged reverse merger fraudcap group: L&L Energy, Inc, (Nasdaq: LLEN). Is this company nothing but yet another Chinese fraud and poised to plunge by over 75%? Read the full report (Price Target <$1.00) and find out.

Key highlights:

  • SAIC reports show that a coal coking factory purportedly owned by LLEN is legally owned by Dickson Lee,CEO, founder and Chairman of the company and that he holds the entity in a sole proprietorship.
  • Chinese government filings also show that the equity of a coal washing factory was not transferred to LLEN as the company has stated, but is still held in a sole proprietorship by a third party.
  • LLEN has also failed to disclose significant minority shareholders in two major subsidiaries and certain material risks associated with its ownership of mining rights.
  • LLEN’s stunning margin profile and meteoric growth rate are the envy of its competitors, even other Chinese coal companies. This is remarkable because apparently three executives with respective backgrounds in finance, insurance sales/Chinese restaurants and career services for the elderly turned a fledging firm into, adjusted for size,one of the most profitable and efficient coal mining companies in the world in just three years. In our opinion, this is not credible.
  • SAIC filings suggest that the Company has been greatly exaggerating its net sales, net income and the value of its assets.
  • As if to lend credence to our arguments, on July 29, 2011, LLEN’s auditor gave an adverse opinion on the company’s internal controls over financial reporting, stating that there is a reasonable possibility that a material misstatement of the company’s financial statements will not be prevented or detected on a timely basis.
  • LLEN’s CEO and founder Dickson Lee boasts a checkered past. Five different regulators have charged Lee (acting through an agent or through LLEN) with securities violations on five separate occasions in connection with the sale of LLEN securities.
  • LLEN has had five auditors in the last ten years, including Jaspers + Hall, PC,which resigned from LLEN when the PCAOB suspended the registration of its only two partners and barred them from auditing publicly listed companies for a minimum of five years.
  • LLEN has only had a non-‘acting’ Chief Financial Officer (CFO) for an aggregate of four months in its history. Suspiciously, three of its past four CFOs have resigned after the end of the company’s fiscal year but before the CFO would have had to sign off on the company’s audited financial statements.

Full report pdf.