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  "documentTitle": "New Oriental Education & Technology Group (EDU)",
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  "authorName": "Carson Block",
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  "presentationDate": "2012-07-18 00:00:00",
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      "text": "The best thing we can say about EDU right now is that it is probably not “a zero” in the conventional fraud sense. It has a real business, and might even overall be profitable. However, there is clearly a lot to be found beneath the hood once the auditor starts looking (e.g., the likely consolidation of heretofore unknown franchisees’ results and upfront fees, and fraudulent PRC financial statements). It is probable EDU will restate earnings, and probable that Deloitte will resign. Beyond the immediate issues of the franchising and fraud, EDU shareholders need to consider the value of their investment in this legal structure. The first problem is that EDU is a weak VIE. The next problem is that the VIE owns the productive assets through schools. According to law, those schools and their assets really belong to the PRC government. Investors should take heed that PRC public company GAAP forbids consolidating schools.",
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