Company accused of hiding bad debts of Chinese hog farmers
By MATEUSZ PERKOWSKI
A Chinese hog-and-feed company that expanded its operations to the U.S. has admitted to engaging in "accounting improprieties" since 2009.
An internal investigation by AgFeed Industries found that its staff in China committed unspecified improprieties related to "legacy" hog farms that were concealed from U.S. managers, according to a filing with the U.S. Securities and Exchange Commission.
The company's audit committee has hired a law firm and a forensic accounting firm to assist in the investigation.
The results have prompted AgFeed to conclude that its financial reports for 2009, 2010 and the first half of 2011 "should no longer be relied upon" by investors, the document said.
AgFeed's chairman and interim CEO, John Stadler, has resigned from his positions at the company "for personal reasons" that don't relate to the investigation, the document said.
Numerous shareholder lawsuits accuse the company of other problems. Complaints allege AgFeed minimized the amount of bad debt owed by farmers who bought feed from the company.
This practice had the effect of inflating its expected earnings, thus unfairly boosting the stock price of AgFeed, which has been publicly traded in the U.S. since 2006, plaintiffs say.
AgFeed's stock was recently valued at below 40 cents per share when the NASDAQ exchange halted trading in the company on Dec. 19 -- a drop of 98 percent from its high point of $21 in May 2008.