Fraud and Farmers: How Sino-Forest Built an Empire
When Canada’s securities watchdog suspended trading in the shares of Toronto-listed Chinese company Sino-Forest in August amid allegations that it exaggerated its land holdings and profits, it sparked a rout on Western-listed Chinese stocks and prompted a U.S. Justice Department review of their accounting practices. Now, The Globe and Mail investigates the method by which Sino-Forest capitalized on Chinese land reforms and, through opportunistic brokers and middlemen, swindled uninformed residents of remote villages into selling their land on the cheap:
“The brokers came to us and they persuaded us by saying, ‘The trees are so far from the village, there’s no road up, and that this (privatization of forestland) is a new national policy that we should co-operate with,’ ” Mr. An recalled in an interview at his family home, which has just undergone a renovation that he says was paid for by his share of the proceeds from the forestry transfer. “They persuaded us to sell.”
He grimaces when asked if he and the villagers got a good deal. “We didn’t know that in the future the land would be worth 180 yuan or even 290 yuan (per mu). We sold it too cheap.”
If Mr. An had phoned around to other villages like his in remote corners of China, he might have received some useful warnings. In the thickly forested south of Yunnan province, near China’s border with Myanmar, villagers are still smarting over a series of trades in 2005 that left them with just 30 yuan per mu (about $67 per hectare) and saw vast tracts of remote forests transferred eventually into the hands of Sino-Forest, only to see them wildly increase in value.
And in coastal Guangdong province, the head of another village that sold to Sino-Forest says he’s hoping the company’s troubles will result in the forestland being transferred back to the farmers, so they can try to sell it again – and perhaps get a fairer deal the next time around.