Recently, the CSRC disclosed the first administrative punishment decision in 2022, Kingenta Ecological Engineering Group Co.Ltd(002470) (hereinafter referred to as “Kim Jong Il”) and eight executives were fined a total of 7.55 million yuan, of which three main responsible persons were banned from the market for 3-10 years.
Jin Zhengda (st Jinzheng, 002470. SZ), founded in 1998, was listed on the Shenzhen Stock Exchange in September 2010. Its main business is the R & D, production and sales of compound fertilizer, slow and controlled release fertilizer, nitro fertilizer, water-soluble fertilizer and other products. The sales volume of compound fertilizer under Kim Jong Il has remained the first in the industry for many years. Wan Lianbu, the actual controller of the company, is also known as the “king of fertilizer”.
On April 30, 2019, Daxin Certified Public Accountants issued a qualified audit report on Kim Jong Il’s 2018 annual report, and a series of problems such as financial fraud gradually surfaced.
After the investigation of the CSRC, Kim Jong Il has “three crimes” such as fictitious trade business, undisclosed connected transactions and false records.
Kim Jong Il inflated revenue and profits by fictitious trading business. From 2015 to the first half of 2018, Kim Jong Il and some subsidiaries carried out fictitious trade business without real logistics transfer through fictitious contracts with their suppliers, customers and other external units, with a cumulative fictitious income of 23.07 billion yuan, a fictitious cost of 21.08 billion yuan and a total fictitious profit of 1.99 billion yuan.
Kim Jong Il failed to disclose related parties and related transactions as required. Wan Moujun is the sister of Wan Lianbu, the actual controller of Kim Jong Il and chairman and general manager. Mr. Wan actually controls three companies, including nobefeng, Fulang and nottel. In theory, these three companies are affiliated legal persons of Kim Jong Il. However, Kim Jong Il did not truthfully disclose the affiliated relationship.
Among them, in 2018 and 2019, Kim Jong Il paid non operating funds of 5.55 billion yuan and 2.53 billion yuan to nobefeng respectively through prepayment, which were not disclosed in the annual reports of 2018 and 2019 as required, and disclosed the nature of non operating capital transactions with nobefeng as operating transactions.
According to the investigation of the CSRC, most of the above funds were transferred into the external capital pool by Kim Jong Il. The funds in the capital pool are mainly used for fictitious trade capital circulation, repayment of loan principal and interest, asset operation outside the system, etc. By the end of 2018 and 2019, after deducting the non operating funds recovered by Kim Jong Il and the funds used for fictitious trade business, the balance of non operating funds between Kim Jong Il and nobefeng was 1.98 billion yuan and 2.76 billion yuan respectively.
There are false records in most of Kim Jong Il’s assets and liabilities. From July 2018 to June 2019, Jin Zhengda, as the drawer and acceptor, issued commercial acceptance bills to 7 companies involved in the above fictional trade business, including Linyi Fangao Agricultural Materials Sales Co., Ltd., through four banks including subcontractor bank, China China Minsheng Banking Corp.Ltd(600016) , Hua Xia Bank Co.Limited(600015) , China Zheshang Bank Co.Ltd(601916) , with a cumulative amount of 1.03 billion yuan.
Jin Zhengda failed to carry out accounting treatment for the above commercial acceptance bills issued by him, resulting in a false reduction of notes payable and other receivables of RMB 930 million in the 2018 annual report and RMB 1.03 billion in the 2019 semi annual report.
According to the facts, nature, circumstances and degree of social harm of the party’s illegal act, the CSRC decided to order Kim Jong Il to make corrections, give a warning and impose a fine of 1.5 million yuan; Wan Lianbu was given a warning and fined 2.4 million yuan; Li Jiguo, then deputy general manager and financial director, was given a warning and fined 600000 yuan; Tang Yong, then manager of the finance department and director of the finance center, was given a warning and fined 550000 yuan; Cui bin, Gao Yiwu, Yan Mingxiao, Zheng Shulin and Xu Hengjun were warned and fined 500000 yuan respectively.
In addition, according to the decision on banning market entry, the CSRC decided to take 10-year market entry ban measures for WAN Lianbu, 5-year market entry ban measures for Li Jiguo and 3-year market entry ban measures for Tang Yong.
