Rino International Settles SEC Executive-Spending Lawsuit

Rino International Corp. (RINO) agreed to settle a lawsuit in which the U.S. Securities and Exchange Commission alleged two of its executives diverted $3.5 million of company assets to buy a home, cars and designer clothing.

Dejun Zou and Jianping Qiu, husband and wife, will pay investors at least that much money to resolve allegations that they also engaged in a scheme to overstate revenue at the Dalian, China-based maker of water-treatment equipment, according to federal court filings today in Washington. Zou is Rino’s chief executive officer, and Qiu is chairman.

Without admitting or denying the SEC’s allegations, Zou and Qiu also agreed to pay civil penalties of $150,000 and $100,000, respectively, according to the court filings. The settlement needs a judge’s approval.

Rino has fallen from a 52-week high of $20.74 in April 2010 to 5 cents a share. Its market capitalization is $600,000, down from a high of about $500 million, according to the SEC.

The agency opened an investigation after Muddy Waters Research, a Hong Kong-based firm that analyzes Chinese companies, issued a report saying Rino had falsified financial documents.

On the day the company completed a public offering in December 2009 that raised almost $100 million, Zou and Qiu used $3.5 million of company funds to purchase a home in Orange County, California, according to the complaint.

Corporate Card

They used a corporate credit card the following July to buy clothes from the from the Chanel and Valentino stores in Beverly Hills, California, the SEC alleged. Rino spent about $95,000 on two Mercedes Benz vehicles that were used by the couple and other employees in the U.S., according to the complaint.

Those expenses weren’t recorded as personal expenses or disclosed in Rino’s filings with the regulator, the agency said.

The case is Securities and Exchange Commission v. Rino International Corp., 13-cv-00711, U.S. District Court, District of Columbia (Washington).

To contact the reporter on this story: Tom Schoenberg in federal court in Washington at tschoenberg@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.