Monday, August 08, 2011

A question for Harbin Electric Chairman and CEO Tianfu Yang

Dear Tianfu Yang:

Short-seller Citron Research wrote a series of articles critical of Harbin Electric's (NASDAQ: HRBN) financial reporting practices. On August 4, 2011, investigative journalist Roddy Boyd reported in his Financial Investigator blog that:

The Securities and Exchange Commission has begun an investigation into Harbin Electric, The Financial Investigator has learned. The company received the SEC’s notice late last month and is using its longtime law firm, New York-based Loeb & Loeb, to advise it.

The following day, Harbin issued a press release denying it is under SEC investigation and denying allegations by Citron Research:

HARBIN, China, Aug. 5, 2011 /PRNewswire-Asia-FirstCall/ -- Harbin Electric, Inc., ("Harbin Electric" or the "Company"; Nasdaq: HRBN), a leading developer and manufacturer of a wide array of electric motors in the People's Republic of China, in response to a rumor in a blog posting, states that the Company is not and has not been the subject of any informal or formal SEC investigation.
"Let me make it very clear that the Company is not the subject of any informal or formal SEC investigation and that it has never been," said Mr. Tianfu Yang, Chairman and CEO of the Company. "As we expected, it is becoming quite clear that people aligned with short-selling interests are doing everything they can to mislead the market in general, and our loyal shareholders in particular, to continuously depress our stock price for the benefit of a few. We condemn this latest attempt to harm our shareholders and we encourage them to be vigilant when considering information that may be disseminated about the Company, including the source of such information," added Chairman Yang.

Further, Bloomberg Businessweek reported that:

SEC spokesman Kevin Callahan cited the agency's policy in saying it will neither confirm nor deny whether it is investigating Harbin.

You say that "...the Company is not the subject of any informal or formal SEC investigation and that it has never been." However, you do not say if the company was contacted by the SEC and asked to produce information about Harbin's financial reporting.

Therefore, I have a question. Did the Securities and Exchange Commission request any information from Harbin Electric relating to its financial reporting even if the company (as you say) is not the subject of any informal or formal investigation by the regulator?

Sometimes companies are requested to provide information to the SEC and say they are not under investigation. For example, in another situation recently reported that:

In mid-May, the U.S. Attorney's Office in Newark served a wide-ranging subpoena on the company's investment banker, John Thomas Financial, requesting all documents related to AMBER Ready, and present and former board members, officers and employees. The subpoena also asked John Thomas to turn over lists of investors and documents relating to the Times Square promotion.
Agostino von Hassell, a spokesman for John Thomas, said Thursday that the firm is complying with the subpoena and has done nothing wrong.
"To issue a subpoena does not imply that they have an active investigation," he said, "and our understanding from the U.S. Attorney's Office in New Jersey is that there is no current active investigation by any federal or state entity against John Thomas."

I suggest that you should clarify whether or not the SEC has requested information from Harbin about its financial reporting, even if you say there is no inquiry or investigation.


Sam E. Antar


I am a convicted felon and a former CPA. As the criminal CFO of Crazy Eddie, I helped my cousin Eddie Antar and other members of his family mastermind one of the largest securities frauds uncovered during the 1980's. I committed my crimes in cold-blood for fun and profit, and simply because I could.

If it weren't for the heroic efforts of the FBI, SEC, Postal Inspector's Office, US Attorney's Office, and class action plaintiff's lawyers who investigated, prosecuted, and sued me, I would still be the criminal CFO of Crazy Eddie today.

There is a saying, "It takes one to know one." Today, I work very closely with the FBI, IRS, SEC, Justice Department, and other federal and state law enforcement agencies in training them to identify and catch white-collar criminals. Often, I refer cases to them as an independent whistleblower. In addition, I teach about white-collar crime for government entities, professional organizations, businesses, and colleges and universities.

I do not seek or want forgiveness for my vicious crimes from my victims. I plan on frying in hell with other white-collar criminals for a very long time. My past sins are unforgivable.

I do not own any Harbin Electric securities long or short. I have no financial relationship with Citron Research, Andrew Left, or Roddy Boyd.

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