The Sino Wood Independent Commission Study Utilization 1.

Sino Forest - a Chinese forestry society listed inwards Canada - is the discipline of the almost spectacular fraud allegation of this bike of Chinese frauds. The allegation was made past times Muddy Waters LLC (MW).

The allegation had 3 prongs:

(a). The forests largely did non exist
(b). Where they existed the valuations were determined largely past times phony transactions alongside undisclosed related parties (the so-called Authorized Intermediaries or AIs) and
(c). There was no bear witness that that many tonnes of wood was harvested inwards the relevant areas inwards Red People's Republic of China - in that place was for event nowhere nigh the necessary number of log trucks.

After the allegations several of the non-executive directors formed an "Independent Committee" (IC) to investigate the claims.

The IC has reported in addition to declared the MW allegations to last false. In especial they declared they have got seen documents proving the accounts are (mostly) accurate in addition to they are confident inwards the authenticity of those documents.

The press originally reported on the IC written report equally definitive. They have got popular off a piddling to a greater extent than nuanced since.

Anyway I innovation on extracting parts of the supporting documents for the IC written report - the almost interesting document released thus far existence the "process memorandum" which outlined the IC's processes.

This share - Paragraph 83 - is concerned alongside checking the authenticity of the documents purporting to bear witness ownership of forests (either dry reason or to a greater extent than oftentimes cutting rights or plantation rights certificates).

It is on the reason of the bear witness presented hither that the IC is confident that the MW allegations are false. I am (proudly) brusk Sino Forest thus I am biased. I am only going to repeat Para 83 verbatim. You tin forcefulness out decide.

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83. There are a number of factors which have got affected the forestry bureau visits in addition to confirmation process: 

(i) Management did non furnish a comprehensive listing of plantation assets which reconciled to its fiscal statements until June 23, 2011;

(ii) Shortly later the MW allegations, Management, on its ain initiative,caused all forestry bureau confirmations to last relocated from their diverse locations throughout the SF organisation to Guangzhou. This resulted inwards delay inwards these documents existence made available to the IC Advisors.Management explained the forestry bureaus wanted the confirmations returned equally they may have got exceeded their private regime inwards confirming for sure rights. However, the confirmations were non returned to the forestry bureaus in addition to were sighted past times the IC Advisors inwards the offices of Chinese counsel to SF; 

(iii) Forestry bureau officials are non required to consider alongside whatever political party regarding the confirmations or the procedure they had undertaken inwards issuing those confirmations. 

(iv) Prior to August 29, 2011, the procedure determined past times the IC did non allow the IC Advisors to inquire whatever forestry bureau whatever questions relating to the existing confirmations; 

(v) The IC Advisors have got non had visibility into the procedure regarding the setting upwards of meetings relating to existing or novel confirmations. Judson Martin, inwards his capacity equally CEO, has agreed to furnish a missive of the alphabet of representation to the IC alongside honour to the procedure undertaken piece he has held this position; 

(vi) The IC Advisors were directed past times Management to catch Yunnan FB #1. This forestry bureau farther directed the IC Advisors to popular off to i of its subordinate county-level forestry bureaus (Yunnan FB #2); 

(vii) In all 4 instances where novel confirmations were obtained, the forestry bureau or other parties who issued the confirmation did non sign the novel shape of confirmation equally sought past times the IC Advisors but instead prepared their ain versions whereby ownership is non confirmed in addition to only a contractual organisation betwixt SF in addition to its Supplier is recognized; 

(viii) The fourth dimension made available for the meetings alongside forestry bureau officials has been express in addition to the IC Advisors have got non been permitted to inquire for sure questions; 

(ix) Due to the express number of senior SF employees/Management participating inwards meetings at the forestry bureaus alongside the IC Advisors, the processes at the diverse forestry bureaus were conducted consecutively rather than concurrently; 

(x) The procedure for SF employees to adapt meetings alongside forestry bureau officials has taken some time; 

(xi) Certain forestry bureaus have got deferred or non permitted the IC Advisors’ requests to access the plantation rights registries. Others have got advised they have got non withal established a searchable registry of plantation rights. The forestry bureaus likewise indicated they create non number novel PRCs for the transfer of standing timber alone. As such, the IC Advisors have got been unable to confirm the existence of the PRCs during the IC Advisors’ visits; 

(xii) In some instances, forestry bureaus would non number the novel confirmations using their letterhead, which is inconsistent alongside prior practices. 

(xiii) Certain forestry bureaus have got given few details equally to what due diligence processes they have got undertaken earlier issuing both the existing confirmations in addition to the novel confirmations. 

(xiv) At a coming together at Hunan FB #1 on September 2, 2011 to validate the authenticity of the existing confirmations, Management represented a forestry bureau official to last the Forestry Bureau First Vice Chief when inwards fact this private was no longer inwards the seat of Vice Chief, in addition to had been paid past times SF for several months prior to the catch to human activity equally a consultant for SF. The IC Advisors sympathize this coming together was recorded past times SF employees, but have got non been provided alongside a re-create of the tape. 

(xv) The novel confirmation obtained at the Hunan FB #2 was non issued past times the forestry bureau; rather, it was issued past times a “social establishment legal person” sponsored past times the Hunan FB #2. The relative bird of comfort of this confirmation equally compared alongside the novel confirmations from forestry bureaus is non clear. 

(xvi) During the Hunan FB #2 catch held on Oct 18, 2011 the IC Advisers were informed past times the one-time Chief of the bureau, FB Official #1, that Vice Chief FB Official #2 was assigned past times the forestry bureau to operate alongside SF since only about 2008 to aid SF inwards conducting its business. The IC Advisers were informed that FB Official #2 continued to have a basic salary from the forestry bureau piece working alongside SF. They were likewise advised that this practise occurs alongside other companies. 

(xvii) The novel confirmation obtained at the Yunnan FB #7 was non issued past times the forestry bureau; rather, it was issued past times a sectionalization of the bureau, namely, the Yunnan Forestry Entity #1. The relative bird of comfort of this confirmation equally compared alongside the novel confirmations from forestry bureaus is non clear. 

(xviii) The IC instructed the IC Advisors non to brand immediately contact alongside forestry bureau officials. The IC explained that Management cited rigid concerns that such contact would negatively impact the Company’s human relationship alongside the forestry bureaus.