Screenshot of the official website of Guangdong Zhengzhong Zhujiang Accounting Firm
Text/Bin Zhao
On the morning of November 17, 2021, the Intermediate People's Court of Foshan City, Guangdong Province, rendered criminal judgments on 23 people involved in the Kangmei Pharmaceutical case, and Ma Xingtian and Xu Dongjin, the former actual controllers of Kangmei Pharmaceutical, were both sentenced.
On the 12th of the fifth day, more than 50,000 retail shareholders won the dispute over the misrepresentation liability of Kangmei Pharmaceutical and Guangdong Zhengzhong Zhujiang Accounting Firm, which provided accounting services, through the "special representative litigation", and the first-instance judgment ordered the defendants to pay 2.459 billion yuan in compensation.
The "double fists" of the two civil and criminal cases struck hard, and Kang Mei and his cadres involved in the case were "two empty" in freedom and wealth.
The state "plays a heavy hand" against acts that harm shareholders and disrupt the investment market and economic order. In today's complex international economic situation, it is very important to purify the investment market and optimize the business environment.
The Kangmei and Kangmei cases have attracted considerable attention in terms of the amount of money and personnel involved, and they are the "first cases" since the implementation of the "special representative litigation" system, but as a case of financial fraud and illegal manipulation of the securities market, it is not the first case, and of course it will not be the last case.
Ma Xingtian was sentenced to 12 years in prison and fined 1.2 million yuan for "manipulating the securities market, disclosing important information in violation of regulations, not disclosing important information, and bribery by units."
Among them, the two crimes of "illegal disclosure and non-disclosure of important information" are not uncommon in the illegal information of listed companies released by the CSRC, and major media and self-media often expose suspected violations such as "illegal disclosure and non-disclosure" found in the financial reports of listed companies.
After such phenomena are verified by the competent administrative department or case-handling unit, once it is found that it touches the standard of filing a case in the Criminal Law, it means that the relevant actors of the listed company may be criminally held accountable.
Moreover, the new rules on "special representative litigation" used for the first time in the Kangmei civil case are of great significance to combating crime and protecting the rights and interests of investors. Article 95 of the New Securities Law clarifies that "investor protection institutions are entrusted by more than 50 investors and may participate in litigation as representatives", establishing the rule that investors "implicitly join and expressly withdraw".
In the "Special Representative Litigation" case, once the defendant is awarded compensation, as long as the retail investors or investors and other relevant interested parties do not explicitly propose not to participate in the class action, they can be compensated together, saving a lot of manpower and material resources that need to be paid in the process of presenting evidence and other litigation. If an individual sues separately, the withdrawal needs to be clearly informed.
This is not only a protection of the legitimate rights and interests of investors such as retail investors, but also allows listed companies and related personnel who want to illegally profit in the capital market to completely abandon the fluke mentality and play a sufficient deterrent effect.
The Kangmei Pharmaceutical case is only one aspect reflected in the process of continuously purifying the securities market and optimizing the investment environment. Accounting firms and other service institutions related to listed companies are also within the scope of supervision.
In 2019, the CSRC filed a case against Guangdong Zhengzhong Zhujiang Accounting Firm for suspected violations of relevant laws and regulations in the audit business of Kangmei Pharmaceutical. On February 20, 2021, the CSRC issued an administrative penalty decision on the Zhongzhong Pearl River.
According to the penalty letter, the CSRC decided to order Corrections to Zhengzhong Zhujiang Accounting Firm and confiscate 57 million yuan; gave Warnings to Yang Wenwei, Zhang Jingli and Su Chuangsheng and imposed a fine of 100,000 yuan each; and Liu Qing was given a warning and fined 30,000 yuan. Some listed companies that have received accounting services from Zhengzhong Accounting Firm have also been affected to varying degrees by the CSRC's investigation.
In the Kangmei civil case, Guangdong Zhengzhong Zhujiang Accounting Firm, as the accounting and auditing institution of Kangmei Pharmaceutical, seriously violated relevant laws and regulations because it did not implement basic audit procedures, resulting in Kangmei Pharmaceutical's serious financial fraud not being discovered by the audit, and was sentenced to bear 100% joint and several liability for compensation. Yang Wenwei, partner and signing accountant of Zhengzhong Pearl River, bears joint and several liability within the scope of Zhengzhong Pearl River's liability.
In its accounting work explaining the Kangmei fraud case, Zhengzhong Zhujiang Accounting Firm said that it was an "accounting error", and Huang Shizhong, dean of the Xiamen National Accounting Institute, directly called this practice "shameless" in an interview with the media. Huang Shizhong pointed out that Kangmei Pharmaceutical's fictitious 29.9 billion bank deposits account for more than 50% of its total assets, and from the perspective of the accounting profession, it is impossible to "make a mistake" to this extent.
At present, the official website of Guangdong Zhengzhong Zhujiang Accounting Firm, which is the "fraud helper" of the Kangmei case, also shows that there are more than 90 listed companies that have provided accounting services by it.
From: The country is a through train
Editor: Chen Haoxing
Editor-in-charge: Wei Xi