Equity research firm and fraud detectives Anonymous Analytics has exposed a number of companies with fraudulent business practices in the past, and they currently have their sights set on the Tianhe Chemicals Group Ltd (HKG:1619). Anonymous Analytics first noted potential fraud with Tianhe — which just IPOed on the Hong Kong Stack Exchange earlier this year — back in early September.
The AA analysts pull no punches in stating their opinions: “We believe that the totality of the evidence shows that Tianhe has vastly misrepresented the size and scope of its business, and has produced false and misleading statements to the market.”
Sent letter about Tianhe Chemicals to Deloitte
In the latest move in their expose of Tianhe, Anonymous Analytics made public the October 13th letter they sent to Tianhe Chemicals Group Ltd (HKG:1619)’s auditors, Deloitte Touche Tohmatsu. In the letter, the AA analysts point out several inconsistencies and contradictions in Tianhe’s responses to their allegations, and present strong evidence that the tax records Tianhe recently made public are inaccurate and quite possibly fabricated or obtained by bribery.
Tianhe tax records inaccurate and wildly inconsistent
The October 13th letter to Deloitte highlights the breadth of problems hinting at fraud at Tianhe Chemicals Group Ltd (HKG:1619), but largely focuses on the firm’s recently produced “tax confirmations” which it tries to use to rebut AA’s charges of fraud.
The AA analysts note: “We have conclusive evidence that the tax confirmation obtained for Jinzhou DPF-TH is false because the numbers do not match the Deloitte-audited SAIC filings.”
They go on to point out that the amounts in the tax confirmations presented do not match with the tax reports previously issued by the Yi County government. The analysts also note that the figures in the Jinzhou DPF-TH tax documents were rounded off. They argue that no professional tax agency would round numbers and that this is a “glaring red flag”.
Last but not least, the AA analysts note that the RMB 781 million Tianhe Chemicals Group Ltd (HKG:1619) claims to have paid in taxes in Jinzhou is “about 2.6 times the total tax income of the county.”