In this report, we present a number of reasons why investors in China Gerui Advanced Materials Group, Ltd. (NASDAQ:CHOP), as well as its auditor and the SEC, should be especially cautious. In the previous post we investigated what appears to be some contradicting information with respect to CHOP's 2011 presented results. This post addresses the likely the lack of transparency regarding the company's operations in China.
1. Corporate Structure per 20-F For the Fiscal Year Ended December 31, 2011 (Link)
- Henan Green was formed in China in December 2000 by Zhengzhou Company together with six individuals
- In December 2006, Zhengzhou Company transferred all its equity interest in Henan Green to 11
- On October 21, 2008, the then shareholders of Henan Green transferred all their equity interest in Henan Green to Wealth Rainbow.
- Wealth Rainbow was organized in 2008 for the sole purpose of acquiring and holding all of the outstanding equity capital in Henan Green.
- Wealth Rainbow was acquired by China Gerui on November 28, 2008.
It follows that the only operating Entity within CHOP is Henan Green Complex Materials Co., Ltd.
According to the Company's SEC filings, the local (Chinese Simplified) name of Henan Green Complex Materials Co., Ltd. (Thereafter: "Henan Green") is:
Source: EX-99.2 22 v164861_ex99-2.htm - (Link)
You can visit the Chinese Website of the Company at the following link:www.henangr.com/
2.1 2010 CHOP's subsidiary Commissioned a Project to build a 5-star Resort
客户：河南鸽瑞复合材料有限公司 = Client: Henan Green Complex Materials Co., Ltd.
Henan Green Complex Materials Co., Ltd. is the only revenue generating Subsidiary of CHOP. In the Company's SEC Filings we have not been able to find any reference to any possible involvement in the eco-tourism Sector.
The name of the project was: 俪舍温泉度假酒店 （五星级）
Work in Progress:
2.1.1 - 2010 CHOP's subsidiary Published Jobs' Ads online to recruit workers for the Hotel/Resort
职位描述河南鸽瑞复合材料有限公司 (=Henan Green Complex Materials Co., Ltd.)，组建于2000年，是河南省百强企业，美国主板上市公司。公司产业园区位于郑州龙湖镇双湖开发区天然湖滨，总面积逾1000亩，公司产业集新材料研究、特种钢深加工、复合材料加工、装备制造、生态观光 ("active in the" .. .. Eco-Tourism)、休闲度假酒店为一体，职工千余人。
因发展需要，公司规划投资1.3亿元的五星级综合性温泉商务酒店已经投入兴建数月，计划2011年下半年投入运营，现诚聘3-5名全职酒店高级运营经理加盟团队。(The company is investing 130 million yuan to build a 5-star SPA Resort and expectes it to be put into operation during the second half of 2011. Due to this developments the company is not seeking 3-5 full time workers to join the senior operation management of the hotel).
联系我们请致电：13525549929 0371-62567609 李先生
You can also veryfy the fact that we are talking about the same company buy just looking at the Website address mentioned in the Ad, namely: gerui-grp.com. At the moment the website is inactive. It was however the website of CHOP's only operating subsidiary.
The following document filed within the SEC confirms it: Link
EX-99.1 3 v165451_ex99-1.htm
|Company Contact:||Investor Relations Contact:|
|Email: email@example.com||CCG Investor Relations|
Another similar Job Ad can be seen here:
Among other things, this a .gov Website reports about the GeRui hotel Project.
Here is the part concerning Gerui (鸽瑞):
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.