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Puda Coal Inc. Message Board

  • puda4ever puda4ever Aug 8, 2012 8:52 PM Flag

    A question ... re SEC penalties

    any idea on how the sec might quantify disgogment and monetary penalties? ... soldier mad ... that s a job only you can do!

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    • No....not really.

      It might be way to much for what he actually did that violated SEC rules.

      This is what makes this case so different.

      Zhao, as Chairman of the BOD and president of the company is guilty only of violating disclosure rules in my opinion. He did not engage in theft as he either owned outright or was given the rights legally of the securities that he moved. He simply did not disclose it.

      In China, and perhaps even here, the move was within his rights, but it should have been disclosed! Which at some point it was...

      The one other person who had he been in the US, could have been hung, drawn and quartered by the SEC, was not even mentioned in the charges. Not by the SEC or the CA!

      That would be Yao Zhao, the appointed CEO of Putai who violated at least a half dozen rules of conduct by transferring the securities from Putai to his brother.

      So this whole case was blown up before it ever began. As such, the fine may be more of a formality to dispense with the mess and get it off the docket as they don't even have the charges or the people right.

      The charges were really more political then based on reality. Congress was under a lot of pressure to do something about the China reverse merger fraud story, and they have oversight responsibilities with the SEC so they applied that pressure to them. The result was a very wordy and strong indictment against Ming Zhao, that in effect was worthless, from a legal and jurisdictional standpoint.

      All the SEC has in it's stash of ammo to use in this matter, is the de-registration of the Puda securities. This would hurt stockholders in a final insult to their injury and violate the very reason the SEC was chartered to begin with.


      This end result of this depends on the negotiations between the SEC and Zhao's lawyers and that this result be given the OK by MZ.

      So the fine won't be too big and only what he is willing to pay to get the matter behind him. If not, Ming Zhao will simply walk away and save his money. His only motivation is to try to make it right, and save the listing in the process.

      But if the SEC plays hardball with nothing in their ammo belt but deregistration, I think MZ will walk. He has many other options, and other potential markets to fund raise in. He can also go through intermediaries and still tap the US.

    • "I cannot see the fine being more than 30 mil, but more likely in the range of 10m. He will then be cleared of all charges, or he will not do the deal. Simple as that...."

      Cleared of all charges? ... I guess this is conditional to him restoring the Puda Coal Inc ownership or performing the buyout!

      It's unacceptable that the SEC clears him of all charges for just 10m ... isn't it? ..

    • Homey, who is Sara Martinelli? Is that a girlfriend, sister, or someone else?

    • I'm just a American Joe.....

      You are asking me to present my entire argument which would take at least 3 posts because of the length.

      There is nothing wrong with the argument that "We are screwed". It is just as valid as "We are not screwed". One of them will be true, not both.

      But after July 25th, 2012, both arguments became equally valid when the 2 year option was used to get out of the trust.

      You see........this was the plan from the start. From before Puda ever found out they had been tampered with. From before Puda discovered where SPCG was getting the money to buy the new mines.

      So you can use that to determine that the end result of this may not be so dire.

      This is something we have talked about on this board now for a year and a half. Now that it has occured, the only thing that remains is the question..."Of all the options, what will Zhao do?"

      We are waiting to hear what that decision is.

    • I mean any (current, past, present)stock holders.

    • Mad! Just curious as you know so much about chinese rules & reg.
      Are you located in China? or are U Asian American?
      You are much hopeful about PUDA than me/us. I do not think stockholders are going to get anything, unless MZ wants to do business with USA or Chinese Govt. twist his arms, I do not see that happening. PUDA has no current corporate structures at all. Please review and advise. Thanks & with best

    • FYI, To support my assumptions, I just took a minute to go through ALL of the SEC's cases on "Fair Funds" or disgorgement orders.

      There is not a single Chinese Company listed, and there appears to be a couple of companies with both US and foreign offices but no China cases.

      I think that all the SEC will do is levy a fine. The size of the fine might be the result of some sort of a disgorgement but it seems more unlikely, the longer I look at it.

      I think Zhao will do that is his own way, if he does it.

      • 1 Reply to madaniels57
      • I dont want to get too personal but since this went under a buck have you increased your position any? I have considered buying 10k shares at these levels. As I explained before I only have 500 shares purchased at 7.49, so if something would occur, a buy out or humpty dumpty being put back together again I would maybe get my money back or make a decent profit. There is certainly a possibility to make an enourmous amount of money here on a relatively small bet and I would rather be part of the "big party" then just getting my money back. Its tough though, I would be betting on Ming & even if Ming is trying to do the right thing, more roadblocks could be placed in front of him preventing him from repairing the problem. I just feel it, something is going on behind the scenes. The guy works everyday, he has not vanished.

        I said this awhile ago, that he was waiting for something to expire. Thats what just happened with Ctic 1 being liquidated and I think it was planned that way a long time ago. A "hand shake", "backroom" deal but on paper it was something else, because it had to be.

        The thing I dont understand but maybe it has already been explained. What about the loan? Did he repay the loan? Or we dont know?

    • P-4,

      All I can say about the SEC is that they are very flexible.

      Disgorgement judgments are usually imposed to clawback salaries, bonuses and stock options that a defendant may have received during the time he/she did the fraudulent or illegal act.

      In the case of Zhao and company, I am not so sure we will see that. Zhao's benefit was that he saved his company from being bought on the cheap, and he grew it as a result of what he did, so the money is in the value of the Chinese restricted assets which the SEC cannot regulate or even touch.

      I think what the SEC will try to do is negotiate the buyout, or the repair of the company which will benefit current shareholders. They will try to get a dollar payment to spread among those who sold out and lost money, based on the loss they incurred in addition to the buyout or the restructuring.

      The SEC's charter is to protect investors.

      During this administration, the fines have increased dramatically, but much of it has been used to fatten the governments empty coffers which is a misuse of the agency. I think the real issue here is getting the Chinese to agree to the SEC's demands.

      As such, it could be that no agreement is possible and the deal gets pushed off to after the election, but frankly I don't see a Republican president and new administration as being better for the Chinese to deal with. They would be more equitable and fair, but not cheaper to deal with or easier to deal with. Conservatives don't have much love for the Chinese. The Liberals love them for their money for political campaigns. President Clinton was a expert fundraiser of Chinese money and Obama is no amateur either.

      I think the penalty might be in the area of 10- 30 million. But I don't see any way to get disgorgement...The Chinese would view the penalty as the end of it. They would not care what the government did with the money. They would require a simple deal to make this work for them and they would want a promise of no further issues on this matter.

      The CA is another matter entirely and you know what I think about it. I think the Chinese will ignore it.

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