EDU: Is the SEC investigation really over? | China Accounting Blog | Paul Gillis

EDU: Is the SEC investigation really over?

New Oriental Education & Technology Group (NYSE:EDU) filed its delayed 2012 20F on October 12, 2012. In a press release, the company says this:

…New Oriental was informed by the staff of the SEC's Division of Corporation Finance that, based on the Company's representations made in response to the SEC's inquiries, the staff has no objection to the Company's consolidation of its variable interest entity, Beijing New Oriental Education & Technology (Group) Co., Ltd. ("New Oriental China")…

However, EDU also makes this curious statement in the press release:

The SEC staff has indicated that it will continue to review New Oriental's disclosure documents, including the 2012 Form 20-F.

So, is the investigation over, or not?  

The actual filing raises more issues:

On July 13, 2012, we were informed that the SEC had issued a formal order of investigation captioned “In the Matter of New Oriental Education & Technology Group Inc.” In that investigation the SEC’s enforcement staff has requested documents and information concerning the basis for the consolidation of New Oriental China, a variable interest entity of our company, and its schools and subsidiaries, into our consolidated financial statements and other issues related to certain allegations about us contained in a report issued on July 18, 2012 by Muddy Waters LLC. We are cooperating fully with the SEC in its investigation. We cannot predict the timing, outcome or consequences of the SEC investigation.

That is a different story. First of all, they say it is the enforcement staff, a term that customarily refers to people working for the SEC’s Division of Enforcement (people who may send you to jail), not the SEC’s Division of Corporation Finance, (people who may make you change disclosures).  

Then they say they cannot predict the timing, outcome, or consequences?

I am skeptical about whether we are getting the straight scoop.  

Post script:

This is what the special committee said on September 30: 

The Special Committee understands that the SEC’s Division of Corporation Finance is engaged in a review of the Company’s consolidation of the financial results of the VIE into the Company’s consolidated financial statements. Accordingly, the Special Committee’s work on that issue is likewise continuing.

Note they say the Divison of Corporation Finance. EDU needs to get its story straight.


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