Zhangzidao, where scallops were "affected" three times, was investigated by the China Securities Regulatory Commission in February 2018 for alleged information disclosure violations. On the evening of July 10th, Zhangzidao Group Co., Ltd. (002069, hereinafter referred to as "Zhangzidao") announced that due to suspected financial fraud and other reasons, the CSRC had taken lifelong market ban measures against Wu Hougang, chairman of Zhangzidao, gave a warning to Zhangzidao and imposed a fine of 600,000 yuan.
After 17 months of investigation, it was found that Zhangzidao and Wu Hougang were suspected of financial fraud, false records and failure to disclose other information in time. Among them, the 2016 annual report and the 2017 annual report disclosed by Zhangzidao, the Announcement on the 2017 Year-end Inventory of Bottom-seeded scallops and the Announcement on Write-off of Assets and Provision for Inventory Depreciation are suspected of false records; The "Announcement on the Sampling Results of Shrimp Scallops at the End of Autumn 2017" disclosed by Zhangzidao is suspected of false records; The situation that there is a big gap between the annual performance in 2017 and the expectation was not disclosed in time.
However, just a week ago, Wu Hougang also publicly stated that "the price was paid for the cognition and awe of risks" and "the loss was sorry for the investors", and said in an interview with The Paper that Zhangzidao had experienced many ups and downs in the construction of marine pastures, and the scallop disaster was a "bumpy" in the practice of exploring marine pastures.
The 2017 annual report falsely reduced profits by nearly 280 million yuan.
Zhangzidao Proliferation Branch will carry forward the cost of bottom sowing scallops at the end of each month, taking the fishing area (collecting coordinates) of scallops provided by Chengjia and Zhao Ying at the end of each month as the basis for cost carrying forward. However, there is no daily regional record for reference in the whole process, and financial personnel have no effective means to verify it.
Therefore, affected by the virtual reduction of operating costs and non-operating expenses, Zhangzidao’s 2016 annual report inflated assets by 131,147,700 yuan, inflated profits by 131,147,700 yuan, accounting for 158.15% of the total profit disclosed in the current period. The total profit in the 2016 annual report was 82,925,300 yuan, and the net profit was 75,714,500 yuan.
According to the investigation of the CSRC, Zhangzidao has the problem of random carry-over. In 2017, the recorded fishing area of Zhangzidao was 57,900 mu more than the real situation, and some of the actual fishing areas in 2016 were transferred to the carry-over cost in 2017, resulting in an inflated operating cost of 61,590,300 yuan in 2017.
The survey also compared the inventory map of Zhangzidao at the beginning of 2016 with the map of shellfish sowing in 2017. The results showed that some recorded inventory areas in 2016 were re-sown at the end of 2017, although they did not show the harvesting trajectory in 2016 and 2017, and the previous inventory cost should be recalculated according to the cost accounting method of Zhangzidao.
Zhangzidao was also suspected of false records in the announcement disclosure of its write-off of assets and provision for inventory depreciation in April 2018. According to the announcement, Zhangzidao has written off the inventory of 1,071,600 mu of shrimp and shellfish, and impaired the inventory of 243,000 mu of shrimp and shellfish, amounting to 577,579,500 yuan and 60,721,600 yuan respectively.
However, the investigation by the Securities and Futures Commission found that the inventory of Zhangzidao did not truly reflect the objective situation. Among the sea areas that were written off, 208,500 mu, 197,600 mu and 36,100 mu of shrimps and shellfish were harvested in previous years respectively in 2014, 2015 and the end of 2016, resulting in an inflated non-operating expenditure of 247,828,100 yuan, accounting for 429.1% of the write-off amount. In the impaired sea area, 63,800 mu of shrimps and shellfish were sown in 2015 and 2016, and 0.13 million mu were harvested in previous years, resulting in an inflated asset impairment loss of 11,105,200 yuan.
The investigation and accounting results show that Zhangzidao Company’s 2017 annual report falsely reduced its profit by 278,650,900 yuan, accounting for 38.57% of the total profit disclosed in the current period. After retrospective adjustment, its performance is still a loss.
False sampling results of scallops: 120 sampling points were planned, and 66 points were not implemented.
According to the announcement made by Zhangzidao in October, 2017, the company sampled and measured the bottom-sown scallops (hereinafter referred to as "autumn survey") from late September to mid-October, and disclosed the results of autumn survey at the end of October, indicating that the sampling and measurement work of all planned 120 survey points had been completed according to the original plan, and the inventory of 1.35 million mu of sea area was estimated, and there was no impairment of the bottom-sown scallops of the company.
By investigating and comparing the autumn survey records published by Zhangzidao and the navigation positioning information of the ship "Zhangzidao Scientific Research 19" provided by Beijing Beidouxingtong Navigation Technology Co., Ltd., it is found that there are very few points on the ship "Zhangzidao Scientific Research 19" that are confirmed by the navigation trajectory to carry out the plan within the autumn survey days recorded by the company.
The survey results show that 66 points extracted from the autumn survey but not actually implemented account for 55% of all disclosed points in the autumn survey. Among them, 19 points out of 21 points in 2014 and 2 points out of 14 points out of 2015 have been actually collected, and at least 21 points in total have been collected before the implementation of autumn survey in 2017. Therefore, there is no need for these points to be sampled.
According to the autumn survey plan of Zhangzidao in 2017, the team leader responsible for the specific implementation, recording and reporting of autumn survey is Shi Jingjiang. The CSRC gave a warning to Shi Jingjiang and his team members and imposed a fine of 200,000 yuan.
There is a big gap between the annual results and expectations, but disclosure is delayed.
In addition to being suspected of financial fraud and false records, Zhangzidao also has major problems in information disclosure.
Through the investigation of the company’s annual report and announcement, inquiry transcripts, details and vouchers of the company’s relevant financial data, the company’s scallop inventory map and bottom broadcast map, the sailing trajectory data of fishing vessels and the calculation data of fishing area, inventory and autumn survey records, the CSRC confirmed that Zhangzidao did not disclose the situation that its annual performance in 2017 was far from the expected.
In October 2017, Zhangzidao lost more than 10 million yuan a month. In mid-November, Gourong, the company’s financial director, found that the scallop sales data dropped sharply. By the end of November, Zhangzidao’s loss had further increased. After the merger, the profit of the year was only about 50 million yuan, which was far more than 20% different from the annual profit forecast of 90 million yuan to 110 million yuan in the third quarterly report.
According to the survey, on January 10, 2018, Gourong, the financial director of Zhangzidao, had learned that the sales loss of scallops in December was more than 4 million yuan. And no later than the beginning of January 2018, Gourong had learned that the company’s net profit in 2017 did not exceed 30 million yuan. "The performance in the fourth quarter of 2017 declined, and the annual performance deviated greatly from the original performance forecast" and reported to Wu Hougang. However, it was not until January 30 that Zhangzidao released the revised announcement of the 2017 annual performance forecast, and then applied for suspension.
According to the relevant provisions of the Securities Law, in early January 2018, when Gourong reported to Wu Hougang that there was a big gap between the annual results and expectations, the information was disclosed, and the information should be disclosed within 2 days. However, it was not until January 30 of that year that Zhangzidao disclosed this situation and was suspected of not disclosing information in time. Wu Hougang and Gou Rong are directly responsible persons in charge.
According to the China Securities Regulatory Commission’s Notice of Administrative Punishment and Market Prohibition of China Securities Regulatory Commission issued to Zhangzidao, Wu Hougang and Gou Rong were fined 300,000 yuan, and the CSRC took lifelong market ban measures against Wu Hougang and five-year ban measures against Gou Rong and others.
On July 10th, Zhangzidao closed at 3.42 yuan per share, down 2.29%.