After more than a year, Fushun Special Steel Co., Ltd. (hereinafter referred to as "ST Fugang", 600399) was finally investigated for suspected violations of securities laws and regulations, and the company disclosed false records of illegal acts for nearly 8 consecutive years since 2010.
On the evening of July 8, ST Fugang issued an announcement that on July 8, the company received the penalty character [2019] No. 87 of the "Administrative Penalty and Market Prohibition Prior Notice" of the China Securities Regulatory Commission (hereinafter referred to as the "Notice"). Previously, on March 21, 2018, ST Fugang received the Notice of Investigation from the China Securities Regulatory Commission (Shen Inspection Bureau Investigation Tongzi [2018] No. 251), because the company was suspected of violating laws and regulations on information disclosure, and in accordance with the relevant provisions of the Securities Law of the People's Republic of China, the China Securities Regulatory Commission decided to file an investigation against the company.
The "Notice" mentions that after investigation, the facts of Fushun Special Steel's suspected violation of the law are as follows:
1. Fushun Special Steel's annual reports from 2010 to 2016 and the third quarter of 2017 disclosed false records of the ending inventory balances
From 2010 to 2016 and from January to September 2017, Fushun Special Steel adjusted the quantity and amount of "returned steel" in the inventory by forging and altering original vouchers and accounting vouchers, modifying the material supply system, cost accounting system, financial system data, etc., and inflated the inventory at the end of each periodic reporting period during the period involved in the case. From 2010 to 2016 and from January to September 2017, Fushun Special Steel accumulated 1989340046.30 yuan in inventory.
Second, the balance of the construction in progress at the end of the period disclosed in the annual report of Fushun Special Steel from 2013 to 2014 was falsely recorded
From 2013 to 2014, Fushun Special Steel falsely used raw materials by forging or altering original vouchers and accounting vouchers, transferred the inflated inventory of the previous year to the construction in progress, and falsely increased the construction in progress at the end of the annual report from 2013 to 2014. From 2013 to 2014, the total number of projects under construction was 1138547773.99 yuan.
Third, the balance of fixed assets at the end of the period disclosed in the annual reports of Fushun Special Steel in 2013 and 2015 was falsely recorded
In 2013 and 2015, Fushun Special Steel transferred the inflated projects under construction to fixed assets by forging and altering accounting vouchers and original vouchers, inflating the fixed assets at the end of the annual reports in 2013 and 2015, and accumulating 8415889283.99 yuan in 2013 and 2015.
Fourth, the depreciation data of fixed assets disclosed in the annual report of Fushun Special Steel from 2014 to 2016 and the third quarter report of 2017 were falsely recorded
From 2014 to 2016 and from January to September 2017, Fushun Special Steel depreciated the inflated fixed assets, inflated the depreciation of fixed assets at the end of the annual report from 2014 to 2016 and the third quarter of 2017, and increased the depreciation of fixed assets by 87394705.44 yuan from 2014 to September 2017.
Fifth, fushun special steel annual report from 2010 to 2016 and the third quarter report of 2017 disclosed in the main business cost data there are false records
From 2010 to 2016 and from January to September 2017, Fushun Special Steel adjusted the quantity and amount of "returned steel" in the inventory by forging and altering accounting vouchers and original vouchers, modifying material supply systems, cost accounting systems, financial system data, etc., and included the raw materials that should be included in the cost of the current period into the inventory, resulting in a small carry-forward of the main business cost of 1989340046.30 yuan during the period involved.
Sixth, fushun special steel annual report from 2010 to 2016 and the third quarter of 2017 report disclosed in the total profit data there are false records
From 2010 to 2016 and from January to September 2017, Fushun Special Steel increased the total inflated profit of 190,191,945,340.86 yuan by inflating inventory, reducing production costs, transferring part of the inflated inventory to projects under construction and fixed assets for capitalization.
After retrospectively adjusting the annual reports from 2010 to 2016, Fushun Special Steel turned from profit to loss for a total of 6 years from 2010 to 2014 and 2016 (before the retrospective adjustment).
The CSRC believes that the above-mentioned acts of Fushun Special Steel constitute a situation in which "the information disclosed by the issuer, listed company or other information disclosure obligor has a false record" as described in the first paragraph of Article 193 of the Securities Law. As for the illegal acts of Fushun Special Steel disclosing false records in the above-mentioned periodic reports, Zhao Mingyuan, directors, Sun Qi, Shan Zhiqiang, Zhang Xiaojun, Wang Yong, Jiang Chenbao, and others who were the chairman, general manager and financial director at the time, knew and organized, planned and decided on financial fraud, and failed to fulfill their obligations of diligence and due diligence.
The "Notice" pointed out that the above-mentioned personnel signed and confirmed on the periodic report involved in the case during their term of office and were the directly responsible supervisors of Fushun Special Steel suspected of illegal information disclosure. In addition, Fushun Special Steel's then directors Xu Dexiang, Zhao Yanzhi, Li Yanxi, Gao Yan, Zhou Jianping, Yao Dianli and others were other directly responsible personnel of Fushun Special Steel suspected of illegal information disclosure. Quan Richun organized the personnel of various departments to cooperate in the completion of financial fraud operations, and was the other directly responsible personnel of Fushun Special Steel suspected of illegal information disclosure.
The China Securities Regulatory Commission (CSRC) intends to
1. Fushun Special Steel Co., Ltd. was ordered to make corrections, given a warning, and fined 600,000 yuan;
2. Give warnings to Zhao Mingyuan, Shan Zhiqiang, directors, Sun Qi, Zhang Xiaojun, Wang Yong, and Jiang Chenbao, and impose a fine of 300,000 yuan each;
3. Give warnings to Shao Fuqun, Wang Chaoyi, Gao Bingyan, Dong Xuedong, Wei Shouzhong, Zhang Yuchun, Zhao Mingrui, Kong Desheng, E Chengsong, Liu Zhentian, Sun Liguo, Cui Hong, Shan Yongli, Wang Honggang, Zhang Hongkun, Xu Dexiang, Zhou Jianping, Liu Wei, Park Wenhao, Zhang Li, Tang Li, Li Gang, and Zhao Guangchen, and impose a fine of 100,000 yuan each;
4. Xu Qingxiang, Zhao Zhenjiang, Zhang Peng, Guo Changhong, Li Maodang, Yi Chenggui, Shao Wanjun, Liu Yanwen, Zhang Yue, Wu Chunyou, Zhao Yanzhi, Li Yanxi, Gao Yan, Yao Dianli, and Quan Richun were given warnings and fined 50,000 yuan each.
The "Notice" said that from 2010 to 2017, Fushun Special Steel had illegal acts with false records in information disclosure for many years, and its illegal acts lasted for a long time, the means were particularly bad, and the amount involved was particularly huge, which seriously disrupted market order and caused serious social impact, resulting in particularly serious damage to the interests of investors.
The China Securities Regulatory Commission (CSRC) intends to decide to impose a lifetime market ban on Zhao Mingyuan, Shan Zhiqiang, directors, Sun Qi, and Zhang Xiaojun, and a ten-year market ban on Wang Yong and Jiang Chenbao.
ST Fugang is one of the most important production bases under Northeast Special Steel Group Co., Ltd. (hereinafter referred to as "Northeast Special Steel"), and is an irreplaceable production and research and development base for special steel materials in high-tech fields such as national defense and military industry, aerospace and so on. In 2016, Northeast Special Steel continuously exposed debt defaults, and finally implemented bankruptcy restructuring.
In September 2017, Ningbo Meishan Bonded Port Area Jincheng Shazhou Equity Investment Co., Ltd., which is actually controlled by Shen Wenrong, chairman of the board of directors of Shagang Group, the largest private steel enterprise in China, acquired 43% of the equity of Northeast Special Steel and indirectly obtained 38.22% of the shares of ST Fugang.