{ "docId": "019dd923-622c-750b-8b95-ddcaae91147c", "docSlug": "16b80d15dcb2", "documentTitle": "Sino-Forest Corporation (TRE)", "authorId": "51_Muddy_Waters", "authorName": "Carson C. Block", "documentKindSlug": "research-note", "documentKindLabel": "Research note", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2011-06-02 00:00:00", "orientation": "portrait", "aspectRatio": 0.7070758, "pageNumber": 7, "pageCount": 40, "prevPage": 6, "nextPage": 8, "slideType": "other", "function": "expose_contradiction", "density": "dense", "nDataPoints": 6, "notes": "This page functions as a forensic narrative, using footnotes to substantiate claims of operational failure and financial mismanagement.", "elementsJson": [ "paragraph", "footnote" ], "metadataConfidence": 0.9, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b95-ddcaae91147c/7", "deckHref": "/decks/019dd923-622c-750b-8b95-ddcaae91147c", "deckJsonHref": "/decks/019dd923-622c-750b-8b95-ddcaae91147c.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b95-ddcaae91147c#slide-7", "components": [ { "bbox": null, "kind": "callout", "text": "The EJV never achieved “normal operations”, and neither the plans for the manufacturing facility, nor any additional land utilization or forest acquisitions were executed.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd952-ee37-76cb-846b-9873b7746672", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.22, "w": 0.62, "x": 0.19, "y": 0.17 }, "kind": "paragraph", "text": "The application included a detailed feasibility study for the MDF board production factory including financial analysis, market studies, and production plans totaling over sixty pages. Leizhou Forestry Bureau’s expectation was that the factory would generate profit, provide value-added manufacturing jobs, and introduce new technology and management knowhow. The articles also reveal a plan for the Leizhou Forest Bureau to make additional land available for harvesting and replanting that would total 8,000 ha (including the original 3,533 ha). This concept formed the basis of TRE’s “phasing-in” program and was also utilized to inflate TRE’s forest rights claims. However, the EJV never achieved “normal operations”, and neither the plans for the manufacturing facility, nor any additional land utilization or forest acquisitions were executed. The signature of TRE’s president, K.K. Poon on the amended articles evidences this fact.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "267ac700-e4f7-41b3-bfa5-164a9fddd2ab", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.22, "w": 0.62, "x": 0.19, "y": 0.4 }, "kind": "paragraph", "text": "The EJV’s 1995 PRC Capital Verification Report (contained in the SAIC file) showed that the JV lost $1.1 million (RMB 8,709,107). The audit report also shows inventory of only $1,100 (RMB 9,000), which is hardly the level required to support an operation making weekly shipments of woodchips of approximately $400,000, as claimed by TRE. By mid-1995, TRE had still not injected the balance of investment. The Forestry Bureau solicited the local COFTEC to send a formal notification reminding TRE of its obligation. By the time the contribution deadline arrived in January 1996, the TRE management team was incommunicado. After the Jan 29, 1996 deadline lapsed, Allen Chan and Chan Shixing failed to respond to formal letters. They also skipped a Board meeting called to resolve the issues.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "7bac0076-28f7-4c69-b986-e1750fb91602", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.07, "w": 0.62, "x": 0.19, "y": 0.09 }, "kind": "paragraph", "text": "Managing forests, wood processing, the production of wood products and wood chemical products, and establishing a production facility with an annual production capacity of 50,000 m³ of Micro Density Fiber Board (MDF), managing a base of 120,000 mu (8,000 ha) of which the forest annual utilization would be 8,000 m³.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "9fb90e9d-7117-4532-b0d6-2966c999ad91", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "“Managing forests, wood processing, the production of wood products and wood chemical products, and establishing a production facility with an annual production capacity of 50,000 m³ of Micro Density Fiber Board (MDF), managing a base of 120,000 mu (8,000 ha) of which the forest annual utilization would be 8,000 m³.” — Leizhou WFOE Amended Articles of Association", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd952-ee37-76cb-846b-9d07ff7d7b11", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.62, "x": 0.19, "y": 0.78 }, "kind": "source-note", "text": "10 Id. 11 Leizhou WFOE Amended Articles of Association, Appendix A3. 12 1995 Annual Audit Report 13 In 1995, p. 13 of TRE’s annual report claimed that TRE shipped out 204.2 BDMT of wood chips at an average price of $103/BDMT. This equals $21,032,600 USD, or approximately $420,652 per week based on a fifty week year. 14 Zhanjiang City Foreign and Economic Relations and Trade Commission. 15 Leizhou Forestry Bureau, Letter Requesting Termination of the EJV See Appendix A5. 16 Leizhou Forestry Bureau, Letter Requesting Termination of the EJV See Appendix A5.", "attrs": { "numbered": true }, "subkind": null, "toolName": null, "toolSlug": null, "confidence": null, "componentId": "bb296bda-82c5-498a-8c3d-4ad14b1499fc", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [], "arcBeats": [ { "to": 40, "from": 3, "beatId": "88101fba-40c4-4ce1-bed1-ff010cf7d0c8", "arcName": "Overcoming the Monster", "arcSlug": "overcoming-monster", "beatName": "Expose Contradiction", "beatSlug": null, "evidence": "The document repeatedly exposes contradictions and suspicious transactions in Sino-Forest Corporation's business practices", "position": 0, "confidence": 0.8, "parentBeatName": null, "parentBeatSlug": null } ], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }