"I've heard war stories from people on things getting missed
in diligence, such as a Chinese company that falsified receipts
to inflate returns. Banks could face regulatory action if they
don't kick the tyres adequately."
So said one in-house lawyer on hearing the news in November
that China Zhongwang was being audited over accusations that it
falsified information for its $1.26 billion Hong Kong initial
public offering (IPO). Mis-statements were allegedly made about
the company's customer base in the prospectus Zhongwang filed
Banks have always been concerned that they might miss
something in diligence. In IFLR's 2007 Asian Bankers' Counsel
Poll, 45% were not happy with the disclosure made by Chinese
companies when listing. But these fears seem to have been
exacerbated by the downturn and the pressure to do deals while
the market is rallying....