China Clean Energy's Auditor Plays It Dirty

The auditor for China Clean Energy (CCGY.OB) and China Kangtai Cactus [CKGT.OB], Michael T. Studer CPA, was singled out in a Barron's article which appeared on 2/18. The following is an excerpt:

"One auditor of Chinese companies like China Clean Energy and China Kangtai Cactus Biotech is Michael T. Studer of Freeport, N.Y. In 2006, during an inspection, the PCAOB (Public Company Accounting Oversight Board) found 'deficiencies of such significance that it appeared...the Firm (Studer) did not obtain sufficient competent evidential matter to support its opinion on the issuer's financial statements.' Moreover, in 2004, the National Association of Securities Dealers expelled Studer's firm and barred him from association with any securities firm.

A spokesman for Studer said the firm "will of course comply with any directives" from the PCAOB. He added the NASD bar did not involve any accounting or auditing matters and is on appeal in federal court."

So I went digging for the 2004 NASD discplinary action and this is what I found. Again, an excerpt:

"On October 14, 2004, the Commission issued an opinion sustaining disciplinary action by NASD against Michael T. Studer and Castle Securities Corp ("Castle"), a former NASD member. We found that Studer and Castle violated the federal securities laws and NASD rules. Castle churned a Castle customer's account; both applicants failed to supervise the trading in that account; and Castle induced the customer to guarantee the margin accounts of other Castle customers without compensation. We sustained NASD's expulsion of Castle from membership and bar of Studer from associating with any NASD member in any capacity."

I think both CCGY and CKGT really need to relook at their choice of auditor. Until this issue is resolved in a satisfactory way, I'm not going to touch either company's shares.

My Position: None.

Comments

[kkin365:]

It is inconceivable that the two Chinese companies knew the CPA firm in question directly. The firm must have been recommended by the two companies' investment advisers. Who are they? And how have they responded to the Barron's article?

2008 Feb 20 08:25 PM

[Grayray:]

Thanks for an intersting article, I only wish you had the info last year.......Oh well, hopefully the company will hear of this and make sure things are "kosher" for the shareholders sake.

2008 Feb 20 09:20 PM