There was a scheme recently uncovered to manipulate the stock of a company. Apparently, certain conspirators sought to drive up the stock price of this particular company by secretly buying a lot of shares worth some $650 million over a two-year period.

The goal of the scheme was to sell the company's shares at an inflated price. This plan concealed the source of stock purchases by using phony companies and more than 100 brokerage accounts. The plotters drove up stock prices by slowly buying 55 percent of the company, using money from companies and investors all over the country. One thing was certain. It was not clear that most of those investors even knew the nature of the scheme.

It all collapsed after an argument of sorts between the two primary conspirators. Needless to say, it has not been determined exactly how much outside investors lost when the price fell but it's millions of dollars. What's also fascinating is that although arrests have been made of a number of the minor players, the alleged ringleaders, or masterminds, are still loose on the streets.

In any event, once the shouting began, the price of stock fell so rapidly that the exchange where the company’s shares were traded stopped trading its shares for 10 days.

Okay, you know who's involved? Sound familiar? No, we haven't found an accounting firm involved…yet!

Well, don't tax yourself any longer. We here in the United States think we've cornered the market on scandals. This one isn't ours. It belongs to a Communist country. Truly. The scandal resides in China and last week, seven people went to trial in a Beijing courtroom with what China calls its biggest securities fraud.

The company involved is one China Venture Capital, a poultry concern. (Chicken feed? Hardly!)

Of course, those who feel constrained to say this is the exception to the rule, consider this: In the summer of 2001, Chinese regulators accused shareholders in a major pharmaceutical company of stealing some $302 million, nearly all its assets, and in February of this year, those same regulators reprimanded a fund management company for stock price manipulation. In fact, eight of 10 other fund management companies in China were also being investigated for similar activities.

No, the matter of Enron/Andersen et al, is not indigenous to America. Of course, this is no solace to the people who lost their 401(k) savings or to the people at Andersen who had nothing whatsoever to do with the obstruction of justice matter; however, what we may be seeing is a worldwide phenomenon.

Although the knowledgeable are well aware that this has been going on for quite some time, it's only just coming to light. Better late than never!

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access