Death of a company | China Accounting Blog | Paul Gillis

Death of a company

Jiangbo Pharmaceuticals (NASDAQ:JGBO) was advised by NASDAQ on August 1 of plans to permanently delist the company's stock. This followed a tumultuous year for Jiangbo, with the CFO resigning in March, the infamous auditor Frazer Frost declining to stand for reappointment (that must have stung), followed by the audit committee resigning en mass in June.  

It would be just another fraud story but for the amazing 23 page letter written by Michael Marks, the chairman of the audit committee. Marks is a former PwC auditor from South Africa. The letter explains in great detail the process the company went through to investigate the fraud allegations. Caldwalader and Ernst & Young were engaged, but faced considerable obstacles put up by management. Ultimately, the investigation was terminated and the audit committee resigned. It is a tale that anyone interested in the endgame in China fraud will want to read. 

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