Two former board members of Xinhua Finance Inc. accused of taking part in a $50 million insider- trading scheme said they aren’t guilty of defrauding investors and lying to regulators.
Shelly Singhal and Dennis Pelino today made their first appearance in federal court in Washington after being charged May 10 with conspiracy, mail fraud and false statements.
Loretta Fredy Bush, Xinhua Finance’s former chief executive officer, who is also charged in the case, didn’t appear in court because of illness, her lawyer said.
“She is under doctor’s orders not to fly,” Bush’s lawyer, Charles Leeper of Drinker Biddle & Reath LLP in Washington, told U.S. District Judge Royce Lamberth. Leeper said it was unclear when his client, who lives in Hawaii, will be able to appear in court.
Xinhua Finance, the first Chinese company listed on the Tokyo stock exchange, provides information products focused on Chinese and international financial markets.
The three are accused of using entities to disguise the sale of shares in Shanghai-based Xinhua Finance from the Securities and Exchange Commission and investors and engage in insider trading, according to an indictment. They are also accused of manipulating the company’s balance sheet to avoid impairment charges.
Singhal and Bush face nine charges. Pelino, who was charged with an additional false statements count, faces 10. Each mail fraud count is punishable by a maximum penalty of 20 years in prison.
Singhal and Pelino will remain free pending trial, Lamberth said today. Both entered pleas of not guilty.
Bush, 52, co-founded Xinhua Finance with Pelino in 1999. She was the company’s chief executive and vice chairman of its board of directors until January 2009, according to the indictment.
Pelino, 63, was chairman of the compensation committee and a member of the audit and investment committees, according to the indictment, and Singhal, 43, was chairman of Xinhua Finance’s audit committee and a member of its compensation and investment committees.
This is the second criminal case against Singhal. He was indicted last year in Washington and is accused of a running a $10 million stock manipulation conspiracy. Three lawyers have pleaded guilty in that case and agreed to cooperate.
The case is U.S. v. Singhal, 11-cr-00142, U.S. District Court, District of Columbia (Washington).
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