When fraud allegations first arose in 2011 against China MediaExpress, CEO Zheng Cheng countered with confidence, telling shareholders that everything was tip-top and the company had a 'reputable and well-known' audit firm behind them. Of course, later that firm — Deloitte — resigned, along with the CFO.
I suppose when you're in a situation like that, you sorta roll with the punches and hope that things don't get any worse. Today, things kinda got worse.
The SEC alleges that China MediaExpress, which purports to operate a television advertising network on inter-city and airport express buses in the People's Republic of China, began falsely reporting significant increases in its business operations, financial condition, and profits almost immediately upon becoming a publicly-traded company through a reverse merger. In addition to grossly overstating its cash balances, China MediaExpress also falsely stated in public filings and press releases that two multi-national corporations were its advertising clients when, in fact, they were not. The company's chairman and CEO Zheng Cheng signed the public filings and attested to their accuracy.
In a little bit of added fun, according to the SEC's complaint, after Deloitte had brought up some concerns and an investigation had started, Zheng then tried to bribe a forensic accountant with $1.5 million "to assist in the investigation."
There's nothing like brazen fraud. But a brazen attempt to cover-up that fraud is an especially nice touch.
SEC Charges China-Based Company and CEO in Latest Cross-Border Working Group Case [SEC]
Complaint [SEC]
