The SEC announced fraud charges today against L&L Energy Inc., which operates out of China and Taiwan, and its founder for making numerous false disclosures, including a misrepresentation that the company had a CFO at all.

According to the SEC, on June 23, 2008, L&L's founder, Dickson Lee, told the company's Board that an individual had been appointed as the company's Acting CFO. Appointing a CFO was a condition imposed by the company's placement agent for L&L to receive raise money from investors. That same day, at Lee's instruction, Lee's assistant sent the "purported Acting CFO" an email thanking her for becoming L&L's Acting CFO. The purported Acting CFO, however, quickly emailed Lee to reiterate that she had never accepted the CFO position and that she was “unable to become L&L Acting CFO as I don't have time to make any contribution to L&L. I need to take care of my own job and my kids as well . . . I wish you could find a more suitable CFO soon.”

Undeterred, L&L Energy and Lee listed the woman as the acting CFO in the company's annual report, and continued to misrepresent that the company had an acting CFO in the next three quarterly reports--including certifications required under Sarbanes-Oxley that "ostensibly bore the purported acting CFO's electronic signature." The SEC noted that the U.S. Attorney's Office in the Western District of Washington is also prosecuting the case and a criminal indictment against Lee was unsealed today in federal court in Seattle.  

The case was a result of the work of the SEC's Cross-Border Working Group, which focuses on companies with substantial foreign operations that are publicly traded in the U.S.

Topics