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  "documentTitle": "TAL Education Group (TAL)",
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  "authorName": "Carson C. Block",
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  "sourceTypeLabel": "Short seller",
  "presentationDate": "2018-06-13 00:00:00",
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  "notes": "The slide uses a 'fraud-exposure' framework to systematically dismantle a specific corporate transaction.",
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      "text": "The highlighted text above is an important lie.",
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      "text": "pre-tax profit inflation: $66.5 Million",
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      "text": "In FY 2016, TAL sold DFRL to a company for close to zero consideration. The buyer was a company called Beijing Shunshun Bida Information Consulting Co. Ltd (\"Shunshun\"). Unbeknownst apparently to TAL's auditor and investors, TAL was already a significant investor in Shunshun when it acquired DFRL from TAL. Shunshun's core business seems to have immediately pivoted to become DFRL.",
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      "text": "In December 2015, the Group acquired 30% equity interest in Shunshun Bida who primarily engages in providing professional counseling services to students who desire to study abroad through its online- to-offline platform. The equity interest was acquired through the Group's purchase of its redeemable preferred shares. The Group recorded a gain of $1,907,669 from transfer of a nonfinancial asset as part of consideration for this investment. There was no change in fair value of the investment in fiscal year 2016.",
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      "text": "Through a series of transactions involving the disposal of a business to an investee, and then acquisition of the same investee, TAL booked approximately $50 million of pre-tax profits through FY2018. We believe the disposal was a fraudulent asset parking transaction, and therefore substantially all of the reported profits are fraudulent. We estimate that these transactions additionally allowed TAL to improperly capitalize another $16.5 million in losses.",
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      "text": "The foundation of these transactions is a lie – a lie about the timing of TAL's initial investment into a company called Beijing Shunshun Bida Information Consulting Co. Ltd. (\"Shunshun\"). We believe the fictitious investment date enabled these transactions to escape auditor and investor scrutiny, and hid the likely fact that TAL controlled the investee prior to transferring the business, Beijing Dongfangrenli Science & Commerce Co., Ltd. (\"DFRL\").",
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      "text": "TAL owned an overseas education intermediary consulting subsidiary called Dongfangrenli (\"DFRL\"). An overseas education intermediary is essentially a licensed broker for handling overseas school recruiting, applications, and placements. TAL bought this business in 2011.",
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      "text": "1 TAL FY2016 20-F, p. F-63\n2 TAL FY2012 20-F, p. 53, F-32",
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      "kind": "title",
      "text": "Transaction 1 – Shunshun – Asset Parking Leading to Improper Profit Inflation of Approximately $66.5 Million",
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