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SEC Charges Two Audit Committee Chairs for Blind Eye

Tammy Whitehouse | April 17, 2014

The Securities and Exchange Commission recently delivered enforcement actions to two audit committee chairs, a rare enforcement target, accusing both of failing to act on obvious red flags of fraudulent accounting and financial reporting.

Both cases involve China companies, AgFeed Industries and L&L Energy, where the SEC says audit committee chairs learned of massive accounting fraud and then looked the other way and continued to oversee the filing of false financial statements. In the case of AgFeed, the SEC says the company and top executives developed an elaborate accounting fraud to report false revenues from China operations to meet financial targets and drive up the stock price. When Ivan Gothner, chair of AgFeed's audit committee, learned of the China-based fraud, he failed to act on recommendations that he pursue an internal investigation and instead allowed false reporting to continue...

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