WASHINGTON May 15 A husband and wife executive
team at a China-based company agreed to settle civil charges on
Wednesday alleging they overstated revenue and used some of the
money for personal expenses, the U.S. Securities and Exchange
The SEC's case against RINO International Corp's
Chief Executive Officer Dejun "David" Zou and Chairman Jianping
"Amy" Qiu marks the latest in an enforcement crackdown by the
agency on disclosure and accounting irregularities at
U.S.-listed Chinese companies.
RINO, provider of various services to China's iron and steel
industry, is one of many so-called "reverse mergers" that has
been scrutinized by the SEC. A reverse merger is a backdoor
method of entering the U.S. marketplace in which a company
merges with a U.S. shell company.
RINO was suspended from trading in 2011, based on
questionable public filings.
Many backdoor merger companies with accounting troubles have
been delisted from U.S. exchanges and faced resignations by
In this case, the SEC alleged that Zou and Qiu diverted $3.5
million in company funds to buy a home in California, without
The company's auditor was also not given a straight answer
after inquiring about the expenditure, the SEC said.
"Executives grossly abuse their positions of trust when they
divert corporate funds for their personal spending," Antonia
Chion, the associate director of the SEC's Division of
Enforcement, said in a statement.
"When making their investment decisions, RINO's investors
did not have the benefit of knowing that Zou and Qiu were
diverting money and the company's revenues were greatly
exaggerated," said Chion.
The SEC said Zou and Qiu agreed to pay $150,000 and
$100,000, respectively, without admitting or denying the
charges. They also will be barred from serving as officers or
directors of a public company for 10 years.
The pair paid $3.5 million in disgorgement in a related
class action settlement.
The settlement proposal must still be approved by a federal
Attorneys for Zou, Qiu and the company did not return calls