U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22823 / September 27, 2013
Accounting and Auditing Enforcement Release No. 3494 / September 27, 2013
Securities and Exchange Commission v. Universal Travel Group, Jiangping Jiang and Jing Xie, Civil Action No. 1:13-cv-01492 (U.S. District Court for the District of Columbia)
SEC Files Fraud Charges Against Universal Travel Group, Its Former CEO and Chair, Jiangping Jiang, and Its Former Director, Secretary and Interim CFO, Jing Xie
The Securities and Exchange Commission today announced the filing of fraud and related charges against Universal Travel Group (UTG), a China-based travel services company, its former CEO and Chair, Jiangping Jiang (Jiang), and its former Director, Secretary and Interim CFO, Jing Xie (Xie). UTG, Jiang and Xie have agreed to settle the SEC's claims against them.
The Commission alleges that UTG, Jiang and Xie failed to disclose cash transfers of approximately $41 million to thirty-four unknown entities in Hong Kong and China between September 2008 and March 2011. The transferred cash derived from private and public stock offerings in the U.S., and UTG claims it was returned to Chinese accounts of its subsidiaries as part of a currency exchange. The complaint alleges that the undisclosed transfers rendered false and misleading the risk factor and liquidity discussions in UTG's public disclosure. The Commission alleges further that the defendants failed to disclose further risks arising from UTG's receipt and usages of cash revenues, and from its inadequate controls over cash and its failure properly to document cash transactions. Further, prior to June 2011 the Commission alleges that the defendants falsely described UTG's business organization, failing to disclose that UTG had transferred certain subsidiaries to third parties pursuant to agreements designed to give UTG the economic benefits of ownership, and UTG materially overstated its revenues and profits in its quarterly reports in 2010. In 2010, UTG is also alleged to have failed to obtain an auditor's attestation to its assessment of internal controls. Jiang and Xie are alleged to have knowingly failed to establish proper internal controls at UTG, caused documents to be falsified, and falsely certified to UTG's internal controls for 2010.
In the settled complaint, the Commission alleges that UTG, Jiang and Xie violated the antifraud provisions of the securities laws, Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The Commission further alleges violations of, or aiding and abetting violations of, the reporting, recordkeeping and internal controls provisions of the federal securities laws, Sections 13(a), 13(b)(2)(A) & (B), and 13(b)(5) of the Exchange Act and Rules 12b-20, 13a-1, 13a-13, 13a-14 and 13b2-1 thereunder. Without admitting or denying the allegations, UTG, Jiang and Xie have consented to the entry of final judgments that: (i) permanently enjoins them from future violations of the federal securities laws; (ii) orders UTG, Jiang and Xie to pay civil penalties of $750,000, $125,000 and $60,000, respectively; and (iii) bars Jiang and Xie from serving as an officer or director of a public company for five years. The proposed settlement is subject to approval by the court.
The Commission also announced today the entry of an order revoking the registration of each class of registered securities of UTG for failure to make required periodic filings with the Commission. See Order Instituting Proceedings, Making Findings and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities Exchange Act of 1934, In the Matter of Universal Travel Group, Administrative Proceeding File No. 3-15528, Exchange Act Release No. 34-70536 (September 27, 2013).
The SEC's investigation was conducted by Robert Wilson, Brad Mroski and Melissa Robertson.