Three senior executives and four subsidiaries of Baifeng Pharmaceutical were involved in a false invoicing case of 50.6 million yuan

Reporter Yan Guowen and Cao Xueping report from Beijing

(Details of the output invoice details of the subsidiary of Baifeng Pharmaceutical, Baifeng Pharmaceutical's announcement/picture)

On April 23, Liaoning Baifeng Pharmaceutical Co., Ltd. (hereinafter referred to as "Baifeng Pharmaceutical"), a company listed on the New Third Board, 872260. NQ) disclosed that in 2023, three executives of the company were criminally detained on suspicion of false invoicing, involving four subsidiaries of Baifeng Pharmaceutical. The case is currently pending.

The case involved a total of 19 external invoicing targets of Baifeng Pharmaceutical's subsidiaries. From January 2019 to February 2023, there were 633 sets of sales invoices, with an amount of 50.596 million yuan excluding tax and 1.3441 million yuan in taxes, and 459 sets of ordinary invoices for input tax, with a total price and tax of 4.5509 million yuan.

The company said that the main reason for the failure to disclose the above matters in a timely manner was that it had no experience in resolving the incident, and at the same time was busy understanding the cause of the incident and stabilizing the company's operations, and because the outcome of the case was undecided.

On April 29, Baifeng Pharma disclosed its 2023 annual report. In 2023, Baifeng Pharmaceutical's revenue will be 296 million yuan, down 3.36% year-on-year, and its net profit will be 8.6967 million yuan, down 45.8% year-on-year. The performance of the four subsidiaries involved in this case will plummet in 2023, and the revenue of individual subsidiaries will plummet.

Zhongqin Wanxin Certified Public Accountants (Special General Partnership) issued a non-standard opinion audit report after the audit of Baifeng Pharmaceutical's 2023 financial statements. According to the relevant audit report, the indictment of the People's Procuratorate of Huanggu District, Shenyang City [Shen Huang Jian Criminal Prosecution (2023) No. 650] mentioned that the defendant Jiang Xuefeng instructed the defendant Lin Jiayi to register and establish 5 units, and was suspected of falsely issuing ordinary VAT invoices, with a total amount of 4.5509 million yuan.

Involving false invoicing

On April 15, Baifeng Pharmaceutical announced that recently, the company found that the bank accounts of subsidiaries had been frozen during the company's daily work and the company's annual audit.

The specific frozen funds of subsidiaries are: Liaoning Breeze Technology Service Co., Ltd. (hereinafter referred to as "Liaoning Breeze") 1.7635 million yuan, Shenyang Kangxin Marketing Management Co., Ltd. (hereinafter referred to as "Shenyang Kangxin") 1.005 million yuan, Dalian Kangxin Marketing Management Co., Ltd. (hereinafter referred to as "Dalian Kangxin") 90,900 yuan, and Liaoning Yuzhonghe Pharmaceutical Technology Co., Ltd. (hereinafter referred to as "Liaoning Yuzhonghe") 2.2292 million yuan. At present, the bank accounts of the subsidiaries have all been unfrozen.

On April 16, the management department of the company listed on the New Third Board issued an inquiry letter on the matter of Baifeng Pharmaceutical.

On April 23, Baifeng Pharma replied to the exchange's inquiry letter. Biofeng Pharma has been aware of the incident through the party's immediate family since March 19, 2023, but the information disclosure was not disclosed until one year later.

Baifeng Pharmaceutical said that the reason why the company did not disclose it in a timely manner was, firstly, the company had no experience in solving this incident and did not have enough understanding of business rules. Secondly, due to the lack of personnel due to the sudden incident, the company had to devote absolute energy to understanding the cause of the incident, stabilizing customers and employees, and ensuring the normal operation of the company, resulting in the neglect of information disclosure obligations. Thirdly, the company and the defense lawyer team believe that the case has not yet been decided, and the disclosure may adversely affect the judgment. As a result, the obligation to disclose information was not fulfilled in a timely manner.

According to the disclosure, the parties to the transaction of the output invoices involved in the case were all pharmaceutical enterprises across the country, and the parties to the transactions of the input invoices involved in the case were all service centers in Shenyang City or service offices in Shenyang City.

The three executives involved in the case are Jiang Xuefeng, Li Guihua and Lin Jiayi. Jiang Xuefeng is one of the actual controllers, director and general manager of Baifeng Pharmaceutical, Li Guihua is a supervisor of the subsidiary, and Lin Jiayi is the legal representative of the subsidiary.

In March 2023, all three executives were placed under residential surveillance at a designated location by the Xinmin Municipal Public Security Bureau on suspicion of offering bribes to non-state workers, and on May 11, the three were released from residential surveillance, but on the same day, they were criminally detained by the Huanggu Branch of the Shenyang Municipal Public Security Bureau on suspicion of false invoicing, and on June 15, they were arrested by the Huanggu Branch of the Shenyang Municipal Public Security Bureau.

On December 25, 2023, the above three executives were prosecuted by the People's Procuratorate of Huanggu District, Shenyang City, on suspicion of false invoicing. On January 25, 2024, the Shenyang Huanggu District People's Court held its first hearing of the case; On January 31, the Shenyang Huanggu District People's Court held a second hearing of the case, and the parties chose to defend their innocence. As of the date of this announcement, the case is still in the process of trial.

The company claims that there is no fictitious business

According to the "2022 Statistical Analysis Report on the Pharmaceutical Circulation Industry" released by the Ministry of Commerce, the main business income threshold of the top 100 pharmaceutical wholesale enterprises is 947 million yuan.

Baifeng Pharmaceutical Co., Ltd. is a pharmaceutical distribution enterprise with pharmaceutical wholesale business qualification, engaged in the wholesale distribution of pharmaceutical products, and the distribution area is mainly in Liaoning Province. In 2022, Baifeng Pharmaceutical's revenue will be 307 million yuan, and its business scale is small, and it is a regional small pharmaceutical circulation enterprise.

In 2023, the top five customers of Baifeng Pharma are: Liaoning Provincial Cancer Hospital, Shengjing Hospital Affiliated to China Medical University, The First Affiliated Hospital of China Medical University, Liaoning Neptune Pharmaceutical Trading Co., Ltd., and Liaoning University of Traditional Chinese Medicine Affiliated Hospital. Biol's sales to the top five customers accounted for 32.48% of its total sales.

The top five general suppliers are: Sichuan Xingkerong Pharmaceutical Co., Ltd., Shandong Taibang Biological Products Co., Ltd., Beijing Shuanghe Pharmaceutical Management Co., Ltd., Liaoning Luoxin Pharmaceutical Co., Ltd., and Chengdu Haitong Pharmaceutical Co., Ltd. The top five suppliers accounted for 48.1% of the annual procurement value of Biofer Pharma.

Baifeng Pharmaceutical stated that the invoicing objects involved in the case were mainly major pharmaceutical companies, and the invoicing objects were real and not fictitious, and they had no relationship with the company and the company's actual controllers, controlling shareholders, directors, supervisors and senior executives. In the course of carrying out business, the invoicing object pays the settlement fee as agreed, and the four subsidiaries issue invoices of the corresponding amount, and both parties have a true and clear behavior. The four subsidiaries have declared and paid taxes on the invoices issued, and there is no tax evasion.

Baifeng Pharmaceutical also said that from 2019 to the first four months of 2023, the company's total operating income was 1.309 billion yuan, and the proportion of the income involved in the case was 3.87% of the total revenue. The amount of income involved in the case accounted for a relatively low proportion of the company's total operating income over the years, and did not constitute a significant impact on the operating income.

Liaoning Breeze, Liaoning Yuzhonghe, Shengyaotong Pharmacy (Shenyang) Co., Ltd. (hereinafter referred to as "Shengyaotong Pharmacy"), Shenyang Kangxin and Dalian Kangxin are the main holding subsidiaries of Baifeng Pharmaceutical. Among the five major holding subsidiaries, only Sheng Yaotong Pharmacy is mainly engaged in pharmaceutical retail, and the other four are mainly engaged in market development, sales, marketing and promotion, which are also the companies involved in the case.

In 2023, the performance of the above five companies of Baifeng Pharmaceutical will decline sharply year-on-year. In 2022, the revenue of the above five holding subsidiaries will be 4.906 million yuan, 4.588 million yuan, 6.48 million yuan, 4.46 million yuan, and 3.27 million yuan respectively. In 2023, the revenue of the above five companies will be 46,000 yuan, 306,000 yuan, 3.416 million yuan, 598,000 yuan, and 0 respectively.

Regarding related questions, the reporter of "China Business Daily" contacted Baifeng Pharmaceutical, but did not receive a response as of press time.

(Editor: Cao Xueping Review: Tong Haihua Proofreader: Yan Jingning)