Ignoring an Inconvenient Truth by Bill Alpert
Summary: CEO Freddy Bush was named Asian Business Media's entrepreneur of the year in October for building up Xinhua Finance Media Limited [ADR] (XFML). The company provides financial news, stock indexes and ratings for the Chinese markets. A March U.S. IPO raised $300 million, which may have helped it buy "hard-hitting proxy advisory firm" Glass Lewis. But last week Glass Lewis's head of research and its managing director resigned after learning that Xinhua's IPO prospectus did not mention some salient facts about the company's then CFO/investment banker Shelly Singhal. Singhal is being tried in California civil court for racketeering, and has been a major investor in two companies (AremisSoft and ACLN) which were eventually exposed as "outrageous frauds." In his letter of resignation, managing director Jonathan Weil said: "I am uncomfortable with and deeply disturbed by the conduct, background and activities of our new parent company Xinhua Finance Ltd., its senior management, and its directors. To protect my reputation, I no longer can be associated with Glass Lewis or Xinhua Finance." On Friday, the company put out a press release that Singhal was resigning from the company's board. Bush was full of praise for Singhal, but eventually admitted she had known about Singhal's NASD problems when assembling the company's prospectus, and had intentionally omitted the information on her lawyers' advice.