U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23214 / March 4, 2015
Securities and Exchange Commission v. China Infrastructure Investment Corp., et al., Civil Action No. 1:15-cv-00307 (D.C.D.C., filed March 3, 2015)
SEC Charges Chinese Issuer and Two Officers with Fraud
The Securities and Exchange Commission filed a civil injunctive action on March 3, 2015, in the United States District Court for the District of Columbia in connection with a fraudulent scheme to file false and forged SEC reports. China Infrastructure Investment Corp.'s 2011 SEC Forms 10-K and 10-K/A and its first quarter 2012 SEC Form 10-Q contained material omissions and misrepresentations, including multiple forged signatures and certifications of CIIC's former chief financial officer. CIIC is a company incorporated in Nevada and engaged in the construction and operation of a toll road in China. The company and its chief executive officer and corporate secretary filed the false reports with the SEC to conceal the fact that the company's CFO had resigned and that CIIC had no CFO at the time of the filings.
The SEC's complaint alleges that CIIC hired Li Lei as CFO on June 27, 2011. On September 21, 2011, less than three month later, Lei resigned effective immediately. Within the week following Lei's resignation, the company's corporate secretary, Wang Feng, falsely reported that the Lei had decided to continue as CFO for a transition period. CEO Li Xipeng and Feng knew at the time of Lei's resignation that NASDAQ had decided to delist CIIC for failure to maintain a minimum share price of at least $1.00, and CIIC was appealing the delisting decision. As the complaint further alleges, Feng believed that public disclosure of the resignation of the CFO could have a negative impact on CIIC's share price, and thus forged Lei's signatures on the filings as part of a scheme to create the false impression that CIIC continued to have a CFO. In furtherance of the scheme, CIIC sent correspondence to NASDAQ and its auditors bearing Lei's forged signature.
The SEC's complaint alleges that all three defendants violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; that CIIC violated Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder by filing materially false annual and quarterly reports, and that Xipeng is also liable for these violations as a control person of CIIC, and that Xipeng and Feng aided and abetted these violations; that Xipeng and Feng violated Rule 13b2-2 by making materially false statements to CIIC's auditors in connection with required reports; and, that Xipeng violated Rule 13a-14 by falsely certifying that CIIC's reports contained no untrue statements of material fact, and that Feng aided and abetted this violation. The SEC's complaint seeks permanent injunctions and civil money penalties against all three defendants and officer-and-director bars against Xipeng and Feng. In related actions, the SEC issued an Order suspending trading in the securities of CIIC and issued an Order instituting proceedings to determine if the registration of CIIC's securities should be suspended or revoked.
The SEC's investigation was conducted by Nancy Singer and Andrew Shirley under the supervision of Conway Dodge. The SEC's litigation will be led by Stephan Schlegelmilch and Melissa Armstrong.