The Financial Investigator has obtained the actual resignation letter that PriceWaterhouseCoopers wrote to the Public Company Accounting Oversight Board when it stopped working for China Medical Technologies, a collapsed Chinese maker of cancer diagnostic devices.
The resignation letter, obtained via Freedom of Information Act and filed with the Securities and Exchange Commission’s Office of the Chief Accountant, is dated April 23 and is a brief, formal notification to China Medical chief financial officer Takyung (Sam) Tsang and the company’s board of directors that PWC resigned the account without providing any reason for doing so. Based on previous FI.com reports–and private PWC communication with investors that FI.com has reviewed–it appears that PWC had not been able to communicate with anyone at China Medical for months. This is congruent with the accounts of others, including former company board member Iain Bruce, the retired former senior partner of KPMG Asia, who wrote a resignation letter noting that he had been unable to hail anyone at China Medical since early January.
Seen plainly, evidence is mounting that save for some truly creative alleged machinations around February 9, China Medical has been dead to the world since the end of last year.
Tomorrow, July 27, the bondholders begin proceedings in the Grand Cayman judicial system to dissolve the company and seize its assets. While a standard tactic for defaulted bondholders to pursue, if the California complaint cited above proves true–and Stroock & Stroock & Lavan’s lawyers insist their claim is based on documents retrieved from Chinese corporate archives–then the bondholders may well recover little of value.
None of this helps answer why the Deutsch family have continued to hold on to a 40% stake in a company whose dissolution begins tomorrow.
Publicly and privately, the Deutsch’s advisors at AER Advisors insist short-sellers have manufactured much of the controversy surrounding China Medical Technology for their own unethical ends. Accordingly, the Deutsch’s, the wine importers turned distressed Chinese equity players, do not appear to have begun reducing their 10.1 million share position.
FI.com reached out to David and Carol O’Leary, the husband-and-wife team running AER, for comment. They angrily insist that since China Medical is a foreign issuer, it does not have to file public notice of a change of auditors. Previously, Carol O’Leary had vocally argued PWC’s resignation had not been proved.