{ "docId": "019dd923-622c-750b-8b95-c91281d84a77", "docSlug": "85021cb773d9", "documentTitle": "RINO International Corp. (RINO)", "authorId": "51_Muddy_Waters", "authorName": "Carson C. Block", "documentKindSlug": "research-note", "documentKindLabel": "Research note", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2010-11-10 00:00:00", "orientation": "portrait", "aspectRatio": 0.7070758, "pageNumber": 12, "pageCount": 30, "prevPage": 11, "nextPage": 13, "slideType": "other", "function": "expose_contradiction", "density": "dense", "nDataPoints": 2, "notes": "This slide is from a Muddy Waters research report exposing a potential fraud or governance issue.", "elementsJson": [ "process_diagram", "paragraph", "bullet_list" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b95-c91281d84a77/12", "deckHref": "/decks/019dd923-622c-750b-8b95-c91281d84a77", "deckJsonHref": "/decks/019dd923-622c-750b-8b95-c91281d84a77.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b95-c91281d84a77#slide-12", "components": [ { "bbox": null, "kind": "callout", "text": "Thus, excluding the funds raised in December 2009 and possibly assets acquired for the Chang Xing Island project with such funds, RINO’s shareholders own little to no productive assets and have received no benefit from the profits VIE purportedly generates.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-14db-7299-bdf2-0723b0726bf9", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.35, "w": 0.56, "x": 0.22, "y": 0.17 }, "kind": "diagram", "text": "Ownership structure diagram showing RINO, Holding Co, Innomind, and VIE.", "attrs": null, "subkind": "process", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "e4686ff1-628d-4660-afb8-d06775344141", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.09, "w": 0.68, "x": 0.18, "y": 0.67 }, "kind": "list", "text": "Sell to Innomind substantially all of VIE's manufacturing equipment and tangible assets for RMB 2,250,343; Lease to Innomind substantially all of RINO's manufacturing plant and land at an annual rent of RMB 612,000; and Pay to Innomind on a monthly basis whatever pretax profit VIE generates.", "attrs": null, "subkind": "bullet", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "14e3a28b-0402-49ee-9377-db42580c76d4", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.11, "w": 0.72, "x": 0.14, "y": 0.55 }, "kind": "paragraph", "text": "When RINO went public via reverse merger in October 2007, VIE had been carrying out all operations. Innomind only came into existence in July 2007 in preparation for the reverse merger transaction. On October 3, 2007, Innomind entered into a series of contracts that were designed to transfer all of the benefits of owning VIE to Innomind without actually transferring ownership. Under the agreements, VIE and its owners (Mr. Zou and Ms. Qiu) agreed to:", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "09336a61-f869-4f14-a810-26eae1b88a1b", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.09, "w": 0.72, "x": 0.14, "y": 0.78 }, "kind": "paragraph", "text": "Despite selling and leasing all of these assets to Innomind, Mr. Zou and Ms. Qiu's company, VIE, is still carrying out all of RINO's operations. And it has not made any management fee payments to Innomind. Thus, excluding the funds raised in December 2009 and possibly assets acquired for the Chang Xing Island project with such funds, RINO's shareholders own little to no productive assets and have received no benefit from the profits VIE purportedly generates.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "6b33fae9-6c3e-4874-97ca-6d58ad8f45fb", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.06, "w": 0.72, "x": 0.14, "y": 0.08 }, "kind": "paragraph", "text": "This is diagram of the ownership relationship between RINO, Innomind, and VIE. Note that VIE's owners are RINO's CEO (Mr. Dejun Zou) and chairwoman (Ms. Jianping Qiu). Mr. Zou and Ms. Qiu are married. RINO's shareholders own 100% of Innomind by way of a holding company.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "ec9a2f0e-9334-41a2-a615-bb66671a8158", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [ { "name": "fraud-exposure", "slug": null, "matchId": "924c0829-a87e-4ad6-a34e-de6ca5da2192", "evidence": "The slide explicitly details a structure designed to siphon benefits from a public company to private owners.", "confidence": 0.9 } ], "arcBeats": [ { "to": 15, "from": 6, "beatId": "d2884dc5-86bf-4df7-a8ec-0f204af93648", "arcName": "Overcoming the Monster", "arcSlug": "overcoming-monster", "beatName": "The Struggle", "beatSlug": "overcoming-monster-the-struggle", "evidence": "The document presents evidence of RINO's financial irregularities and management issues", "position": 1, "confidence": 0.8, "parentBeatName": "Development", "parentBeatSlug": "development" } ], "loops": [ { "to": 12, "from": 10, "name": "The Reveal", "slug": "05-the-reveal", "bestFor": "Product launches, strategic pivots, unexpected findings", "matchId": "9b8daa97-0080-4044-b12b-633914a6f06c", "evidence": "The document reveals RINO's founders have failed to transfer income to the company", "position": 1, "objective": "Reveal RINO's founders have failed to transfer income to the company", "structure": "Setup the Question -> Build Suspense -> The Big Reveal", "confidence": 0.7, "description": "Build mystery and anticipation, then deliver a surprising or powerful conclusion" } ], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }