US: DOJ’s Chinese backdoor merger case stirs debate

In one of the first cases of its kind, reports say defense and prosecution quarreled over how the US Department of Justice is approaching a lawsuit against the ex-head of a China-based reverse merger company.

According to reports, lawyers argued Tuesday over the information that can be handed over regarding the prosecution of Chao Jiang, the former vice president of China North East Petroleum Holdings, over allegations of fraud and lying to the US Securities and Exchange Commission. The company is a backdoor merger firm, meaning the company acquired a public company so it, too could go public in the US without the lengthy legal process.

The DOJ and the SEC have pursued these mergers in recent years in an agenda to breakup suspected fraud of Chinese companies listed in the US. The efforts have lead to authorities delisting many companies found to have not filed proper reports. But reports say federal regulators have been obstructed from its goals, often because the Chinese firms refuse to hand over relevant information, citing Chinese secrecy laws.

Prosecutors reportedly clashed with Jiang representatives over the information that can be handed over in the case, and whether the DOJ had properly followed protocol in its investigation.

The case is set for trial next month.

Full Content: Reuters

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