Recently AgFeed a company based in China that merged with a US company in 2010 settled its civil accounting frauds case filed by the SEC for $18M. The company was charged with reporting fake revenue from its China based operations to help inflate their stock price. Along with the civil accounting fraud case against the company, SEC charged the company’s former US based independent audit committee chairman, K. Ivan Gothner, a rare move by the SEC. The agency also charged four Chinese company executives and the former US based CFO Edward Pazdro with fraud.
The story is that the company kept two books- a real one for internal purposes and a fake one for external purposes. The company inflated its revenue by ~$240 million by using fake invoices for feed and hog sales and by inflating the weight of the hogs (because fatter hogs fetched higher prices). To cover up the fraud the company later reported that the fake hogs had died!
Wow that is a very imaginative fraud, and people say accountants are boring!
