{
  "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": 9,
  "pageCount": 30,
  "prevPage": 8,
  "nextPage": 10,
  "slideType": "expose_contradiction",
  "function": "expose_contradiction",
  "density": "balanced",
  "nDataPoints": 0,
  "notes": "This is a research note from Muddy Waters Research exposing potential accounting fraud.",
  "elementsJson": [
    "headline_text",
    "paragraph"
  ],
  "metadataConfidence": 1,
  "imagePath": null,
  "slideHref": "/slides/019dd923-622c-750b-8b95-c91281d84a77/9",
  "deckHref": "/decks/019dd923-622c-750b-8b95-c91281d84a77",
  "deckJsonHref": "/decks/019dd923-622c-750b-8b95-c91281d84a77.json",
  "deckAnchorHref": "/decks/019dd923-622c-750b-8b95-c91281d84a77#slide-9",
  "components": [
    {
      "bbox": null,
      "kind": "callout",
      "text": "RINO is committing a complicated accounting fraud with a lot of moving parts.",
      "attrs": null,
      "subkind": null,
      "toolName": "Visual emphasis",
      "toolSlug": "visual-emphasis",
      "confidence": null,
      "componentId": "019dd953-14db-7299-bdf1-30c9298f86af",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.18,
        "w": 0.72,
        "x": 0.14,
        "y": 0.12
      },
      "kind": "paragraph",
      "text": "As we detail on the next page, RINO’s SEC filings showing that it had no income tax expense in 2008 and 2009 cannot be correct. (RINO should have paid income taxes of at least 15% in 2008 and 2009.) We cannot comment on the exact implications of RINO’s misstatement. In a general sense though, RINO is committing a complicated accounting fraud with a lot of moving parts. When the difference between reality and reported numbers is great, it is easy to make mistakes. Claiming zero income taxes in 2008 and 2009 is one such mistake. RINO has had four CFOs in three years, which increases the challenge of committing the fraud.",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "7016a5c7-928c-4370-bafc-337c22877d0a",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.25,
        "w": 0.72,
        "x": 0.14,
        "y": 0.31
      },
      "kind": "paragraph",
      "text": "There are two principal entities involved in the tax analysis: Dalian Rino Environmental Engineering Science and Technology Co. Ltd. (“VIE”), and Dalian Innomind Environment Engineering Co., Ltd. (“Innomind”). VIE is RINO’s operating entity, but is owned by the Company’s CEO, Mr. Dejun Zou, and chairwoman, Ms. Jianping Qiu. (Mr. Zou and Ms. Qiu are married.) Innomind is owned by RINO (i.e., the public company), and its purpose is purportedly to provide management services to VIE in return for 100% of VIE’s pre-tax income. (See RINO’s Founders Have Failed to Transfer Income to the Company, and to Let the Company Operate out of the Facilities it Supposedly Leases. What do RINO Shareholders Actually Own? for an in-depth discussion of the relationship between VIE and Innomind.) Recall that according to the 2009 SAIC income statements, VIE is the only RINO entity booking any revenue.",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "716fb903-41b9-428b-81f8-328defe9170c",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.18,
        "w": 0.72,
        "x": 0.14,
        "y": 0.57
      },
      "kind": "paragraph",
      "text": "The key takeaways from the following table analyzing RINO’s claimed tax treatment are 1) Innomind has no applicable exemptions to its income in 2008 and 2009, 2) Even if VIE transferred income to Innomind via a management fee, VIE cannot deduct this expense from income; and, thus RINO (through VIE) would have paid income taxes. (Any income transfer other than a management fee would have to be conducted according to PRC “arms length” transfer pricing principles, which would also not allow VIE to reduce its taxable income to zero.)",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "b76e56a6-eb2e-4c1c-a052-b7b7e152af27",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.03,
        "w": 0.5,
        "x": 0.14,
        "y": 0.08
      },
      "kind": "title",
      "text": "No Income Tax in 2008 and 2009? Something’s Cooking",
      "attrs": null,
      "subkind": "headline",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "1e11a936-2692-414b-8c31-4d0bb9386ceb",
      "frameworkName": null,
      "frameworkSlug": null
    }
  ],
  "metrics": [],
  "tools": [],
  "frameworks": [
    {
      "name": "fraud-exposure",
      "slug": null,
      "matchId": "ef6b7e01-3d6d-414e-9ac9-9a0ee148a62b",
      "evidence": "The slide explicitly identifies accounting fraud and explains the mechanism of the misstatement.",
      "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": [],
  "imagePathAlt": null,
  "thumbSrc": null,
  "thumbSrcAlt": null,
  "locked": true
}