Chinese Firm Taken Private by Carlyle Settles SEC Insider Claims

  • Focus Media and CEO Jiang will pay $55.6 million in penalties
  • Allegations stem from 2010 sale of Allyes unit to employees

A Chinese advertising company and its chief executive officer will pay $55.6 million to settle U.S. claims stemming from the sale of a subsidiary to insiders.

Employees, managers and directors of Hong Kong-based Focus Media Holding Ltd., which was taken private by Carlyle Group LP two years ago, bought a 38 percent stake in Allyes Online Media Holdings under a 2010 incentive plan that put the unit’s value at $35 million, the Securities and Exchange Commission said in a statement Wednesday. At the same time and without shareholders’ knowledge, Focus was involved in talks that led to the unit’s sale for $200 million four months later, the SEC said.

CEO Jason Jiang and Focus, which was taken private after coming under pressure from short-seller Carson Block, violated U.S. securities laws by providing materially false and misleading public disclosures and failing to “heed red flags about the transactions,” the SEC said. They settled the claims without admitting or denying wrongdoing, with Jiang agreeing to pay more than $21 million in fines, disgorgement and interest, and Focus accepting a $34.6 million penalty, the agency said.

“This action against a China-based company and its CEO shows that issuers and the most senior officers will be held accountable for providing accurate information to the public, regardless of where their operations are located,” said Andrew M. Calamari, director of the SEC’s New York regional office.

Investors led by Carlyle bought out Focus Media for almost $4 billion in 2013 after Block’s Muddy Waters LLC claimed the billboard operator exaggerated its network and overpaid for acquisitions. The company rejected the allegations.

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