Monday, May 14, 2012
The SEC charged China Natural Gas Inc., a China-based natural gas company, and Qinan Ji, its former CEO, for defrauding investors by secretly loaning company funds to benefit the executive's son and nephew while failing to disclose the true nature of the loans.
The SEC alleges Ji, who remains chairman of China Natural Gas Inc., coordinated two short-term loans totaling more than $14 million in January 2010. One loan went to a real estate firm co-owned by Ji’s son and nephew through a sham borrower. The other loan went to a business partner of the real estate firm. Ji signed the company’s SEC filings that falsely stated the loans were made to third parties. Ji then lied about the true borrower to China Natural Gas’s board, investors, and auditors as well as during the company’s internal investigation.
The SEC also alleges that in the fourth quarter of 2008, China Natural Gas paid $19.6 million to acquire a natural gas company but did not timely and properly report the transaction in its SEC filings. As with the loans, Ji approved the acquisition without obtaining prior authorization from the board.
The SEC’s complaint seeks a final judgment that imposes financial penalties, bars Ji from acting as an officer or director of a public company, and permanently enjoins Ji and China Natural Gas from future violations of these provisions.