Jan 16 A Hong Kong arbitration panel has ruled that China MediaExpress Holdings Inc was a "fraudulent enterprise" and awarded $77 million to Starr Investments, a firm run by former AIG chief Maurice Greenberg, a U.S. court filing shows.
Starr sued China MediaExpress in 2011, saying it had been fraudulently induced to invest in the advertising firm, whose shares were subsequently delisted from stock exchange in the United States.
Starr also sued China MediaExpress auditor Deloitte Touche Tohmatsu. (r.reuters.com/hem35t)
Starr's total investment in China MediaExpress amounted to about $53.5 million, according to court papers.
A three-judge panel in Hong Kong ordered that the three founders of China MediaExpress pay damages of about $77 million to Starr Investments. The ruling came out in December and a copy of it was submitted by Starr in the Delaware district court on Tuesday.
Starr submitted a copy of the Hong Kong arbitration ruling with the Delaware district court as opposition to a China MediaExpress motion to dismiss the Hong Kong panel award.
China MediaExpress's website (www.ccme.tv) shows no investor updates since early 2011. A request for comment from the firm's investor relations email address bounced back as undeliverable.
The Chinese company had filed with the U.S. Securities and Exchange Commission (SEC) saying it was a television advertising operator on inter-city and airport express buses in China.
However, the arbitration panel in its ruling said the company "never had the business it represented to the world that it had or that, if it did, it has been ravished by dishonest conduct on the part of those who conducted the business."
In the court documents, China MediaExpress blamed the company's collapse on certain "short sellers" who published critical reports concerning the company in 2011.
The Chinese company was accused of overstating its revenue by online research firm and short seller Muddy Waters.
"China MediaExpress offered no explanation as to how the short seller attacks destroyed the business in a few months," the panel ruled.
Deloitte resigned as Chinese MediaExpress's auditor in March 2011, having raised concerns as to the authenticity of its financial statements.
The case is in re Starr Investments vs China MediaExpress et al, Case No. 1:11-cv-00233-UNA, U.S. District Court, District of Delaware. (Editing by Rodney Joyce)