July 22 (Bloomberg) -- The U.S. Securities and Exchange Commission sued China Intelligent Lighting & Electronics Inc. and NIVS IntelliMedia Technology Group Inc. over an alleged scheme to divert more than $29 million from investors in 2010.
China Intelligent Lighting, based in Guangdong, China, and Huizhou-based NIVS IntelliMedia Technology Group and their chief executive officers made false representations and raised funds in initial public offerings in 2010, according to the complaint filed today in federal court in Manhattan.
China Lighting raised $7.6 million for an IPO in June 2010 while NIV raised $21.5 million in a public offering in April 2010, according to the complaint. Contrary to their representations, the defendants and company executives diverted the proceeds “almost immediately upon receipt,” the SEC alleged.
“To mask the diversions, the defendants falsified bank and accounting records to reflect inflated cash balances, lied to their auditor about cash balances and made false and misleading filings with the commission,” according to the complaint.
The two companies, who used the same auditor, furthered the scheme by providing the auditor with false bank and accounting records, the SEC alleged. Company officials also provided false statements to the SEC in response to subpoenas, the commission said.
After regulators began scrutinizing the companies, the auditor who worked for both companies resigned in March 2011 and both China Intelligent Lighting and NIV have failed to file periodic reports since then, the SEC alleged.
The SEC opened the investigation in 2010 amid concerns that some Chinese companies that gained listing on U.S. exchanges were doctoring their financial statements. U.S. exchanges have frozen or delisted shares of more than a dozen China-based firms since the investigation began.
The SEC suit includes claims of violations of securities laws, aiding and abetting and falsification of books and records. Regulators seek an order for disgorgement of all ill-gotten gains.
The case is U.S. Securities and Exchange Commission v. China Intelligent Lighting and Electronics Inc., 13-cv-05079, U.S. District Court, Southern District of New York (Manhattan).
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