U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22719 / June 7, 2013
Accounting and Auditing Enforcement Release No. 3463 / June 7, 2013
Securities and Exchange Commission v. China Natural Gas, Inc. and Qinan Ji, Civil Action No. China Natural Gas, Inc. and Qinan Ji
China Natural Gas and Executive Settle Fraud Charges
The Securities and Exchange Commission today announced that on June 5, 2013, the U.S. District Court for the Southern District of New York entered settled final judgments as to defendants China-based China Natural Gas Inc. and its chairman and former CEO Qinan Ji. The defendants have agreed to pay penalties to settle fraud charges the SEC brought against them last year for secretly loaning company funds to benefit Ji's son and nephew while failing to disclose the true nature of the loans.
As alleged in the SEC's complaint filed on May 14, 2012, China Natural Gas failed to disclose in 2010 the related-party nature of two loans totaling $14.3 million, which were made to benefit a real estate company that was 90 percent owned by Ji's son and 10 percent owned by Ji's nephew. Ji approved both loans without obtaining prior authorization from the board or informing the CFO, and he repeatedly lied to the board, the auditors, investors, and the company's internal investigators to conceal the related-party nature of the loans. The SEC also alleged that in the fourth quarter of 2008, China Natural Gas paid $19.6 million to acquire a natural gas company, but did not timely and properly report the transaction in its SEC filings.
To settle the SEC's charges, China Natural Gas agreed to pay a penalty of $815,000, and Ji agreed to pay a penalty of $100,000. Ji also agreed to reimburse China Natural Gas his trading profit of $77,479. China Natural Gas consented to the entry of a final judgment enjoining it from violating Section 17(a)(2) of the Securities Act of 1933, Sections 13(a), 13(b)(2)(A), 13(b)(2)(B) and 14(a) of the Securities Exchange Act of 1934 and Exchange Act Rules 12b-20, 13a-1, 13a-11, 13a-13 and 14a-9. Ji consented to the entry of a final judgment enjoining him from violating Section 17(a) of the Securities Act, Sections 10(b), 13(b)(5) and 14(a) of the Exchange Act and Exchange Act Rules 10b-5, 13a-14, 13b2-1, 13b2-2 and 14a-9, and Section 304 of the Sarbanes-Oxley Act of 2002, and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, 13a-11 and 13a-13, barring him from serving as an officer or director of a public company for 10 years.
For more information, see Litigation Release No. 22368 (May 14, 2012);