Short selling and fraud: The case of Silvercorp Metals
Michael McCullough, 13 March 2012
The letter arrived at the Vancouver office of Ernst & Young on Aug. 31 in an envelope bearing $6 in U.S. postage. There was no return address and instead of salutations, it began with a headline: “Potential $1.3 billion accounting fraud at Silvercorp.”
Rui Feng, the founder and chair of Vancouver-based Silvercorp Metals Inc., was in Beijing at the time. He heard about the letter over the phone from Bob Gayton, head of the audit committee, who’d been alerted by Ernst & Young, auditor to the mining company, which at the time had a $1.5-billion market value, thanks to its two operating lead-zinc-silver mines in China and undeveloped properties in China and B.C. But Feng had an inkling something like this was coming.
