There is an interesting alleged accounting fraud unfolding in China. Sino-Forest Corporation, a Chinese company in the business of selling timber, has been accused by short sellers of being a massive Ponzi scheme.
Like Enron, they seem to be running their business through a complex system of subsidiaries in order to obfuscate transactions.
One of the funnier quotes from the short sellers’ report is below:
Despite TRE’s opacity on the revenue side, we have overwhelming evidence that the $231.1 million in Yunnan province timber TRE claimed to sell is largely fabricated. Such amount exceeds TRE’s real timber holdings in Yunnan province. It exceeds the applicable harvesting quotas by six times. Transporting the harvested logs would have required over 50,000 trucks driving on two-lane roads winding through the mountains from this remote region, which is far beyond belief (and likely road capacity).
In other words, the amount of timber they claimed to sell in this one transaction not only exceeded their holdings, but the provinces’ road capacity. Oops. They should have sandbagged a little.