Taiwan stock regulators asked KPMG LLP (安侯建業) to explain its audit of a company in which investors lost all their money after it persuaded them to fund a flat-panel display factory that was never built.
KPMG will "bear the obligation" to show it properly audited Sinovision Technology Corp (華象科技), which sold NT$4 billion (US$116 million) of shares to more than 2,000 investors between 1998 and last year, said Lee Chi-hsien, who heads the Securities and Futures Commission (SFC) investigation.
Sinovision never built the factory and never traded its shares on the Taiwan Stock Exchange, as it had promised to do. Its chairman, Lee Yi-shih (李逸士), allegedly took off to Canada last year and board director Liu Kai-chi (劉凱齊), another suspect in the scam, is believed to be in China.
KPMG, which audited Sinovi-sion's 2000 accounts, denied any impropriety.
"We have never falsified any document related to Sinovision's accounts," it said in a statement.
The accounting firm issued a report on the accounts in April last year in which it expressed "reservations" about NT$232 million of accounts receivable. Those represented 22 percent of Sinovision's NT$1.05 billion of assets, KPMG said then.
The Securities and Futures Commission last year asked Sinovision to support its share-sale plans by submitting additional documents such as patents.
Sinovision pledged Lee Yi-shih's personal stake in the company to the commission to guarantee the value of the accounts receivable so that KPMG could issue a final audit report without reservation, KPMG said.
The company's shares were traded privately through brokers and agents. Sinovision's Lee lured investors by citing local media reports that cast the company in a favorable light.
The local Chinese-language Economic Daily News in March 2000 described Sinovision's products as "revolutionary," and the local Chinese-language Commercial Times said in February last year that the company had built a flat-panel display plant and forecast sales of NT$1 billion that year.
The company's share price rose to as high as NT$80 per share on the unlisted market on the face value of NT$10 per share -- without the company producing a single LCD panel.
Meanwhile, SFC officials said investors buying unlisted company shares on the gray market should be well aware of the risks involved.
The story first broke in the Chinese-language media on Thursday when DPP Legislator Chen Chin-chun (
Chen accused the company of creating false publicity in the local business media and associating itself with major industry leaders to add legitimacy to the company.
He also lashed out at the SFC for failing to prevent the scam.
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