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by Mike Caswell
The Ontario Securities Commission has delivered a ruling after a lengthy hearing into the collapse of Sino-Forest Corp., finding against the company and its management. The regulator has determined that Sino-Forest and its management deceived investors for years about the company's financial condition. Among other things, Sino-Forest reported assets that it did not own and sales contracts that had no economic substance.
The case arose after Sino-Forest collapsed in the wake of a report by short-seller Carson Block. The report contended that the company had massively exaggerated its assets and had "always been a fraud." The stock fell to $5.23 in the days after the report, down from $18.21. (The Toronto Stock Exchange has since delisted the company.)
Friday's decision follows a 188-day hearing that ran for parts of three years. Sino-Forest did not attend, but five of its former executives did. In all, 10 lawyers appeared at the hearing before three OSC commissioners.
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