ChinaCast Education: Difference between revisions

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'''ChinaCast Education Corporation''' is a Hong Kong-based for-profit, [[post-secondary education]] and [[e-learning]] services provider in the [[People's Republic of China]]. Established in 1999, the Company provides its post-secondary degree programs through its 80% ownership in the holding company of the Foreign Trade and Business College (FTBC) of [[Chongqing Normal University]]. The company provides its e-learning services to post-secondary institutions, K-12 schools, government agencies and corporate enterprises via its nationwide [[satellite broadband network]]. Through its history, ChinaCast has faced a number of legal issues and allegations of fraud.

==History==

The Company was founded in 1999 by Ron Chan Tze Ngon as ChinaCast Communications Limited,<ref name="RTTNews 2012 z829">{{cite web | title=ChinaCast Education Removes Ron Chan Tze Ngon As Chairman, CEO | website=RTT News | date=2012-03-26 | url=https://www.rttnews.com/1847857/chinacast-education-removes-ron-chan-tze-ngon-as-chairman-ceo.aspx | access-date=2024-04-09}}</ref> and subsequently raised a Series A venture capital round which included investors [[Hughes Network Systems]] and [[Intel Capital]].{{Citation needed|reason=Tagging this until sourced have been added.|date=April 2024}} In May 2004, the Company was renamed ChinaCast Communications Holdings Limited (CCH) and made an [[initial public offering]] on the [[Singapore Stock Exchange]]. On December 22, 2006, Great Wall Acquisition Corporation, a US-listed [[Special-purpose acquisition company|Special Purpose Acquisition Company]], completed the 100% acquisition via tender offer of CCH in a reverse merger transaction.{{Citation needed|reason=Tagging this until sourced have been added.|date=April 2024}} Great Wall Acquisition Corporation was then renamed ChinaCast Education Corporation in early 2007 and then listed on the [[NASDAQ]] Global Market Exchange in 2007.<ref name="Reuters 2016 u182">{{cite web | title=ChinaCast files for bankruptcy to pursue embezzlement claims | website=Reuters | date=2016-11-10 | url=https://www.reuters.com/article/idUSL1N1DB2ID/ | access-date=2024-04-09}}</ref> In April 2008, the Company completed the acquisition of 80% of the holding company of the Foreign Trade and Business College of [[Chongqing Normal University]].{{Citation needed|reason=Tagging this until sourced have been added.|date=April 2024}} Based in Hong Kong,<ref name="Solomon 2011 z624"></ref> all of the company's assets are in mainland China, and it is organised under Delaware law.<ref name="Solomon 2012 z508">{{cite web | last=Solomon | first=Steven Davidoff | title=China Case Reveals Risks of Investing in a Foreign Company | website=The New York Times - DealBook | date=2012-01-13 | url=https://archive.nytimes.com/dealbook.nytimes.com/2012/01/12/china-case-reveals-risks-of-investing-in-a-foreign-company/ | access-date=2024-04-09}}</ref> As of 2011, ChinaCast owned three physical education centres in addition to its e-learning platforms.<ref name="Lam 2011 s028"></ref> In early 2011, the company was listed with a market value of US$285 million. That value dropped to US$150 million and, after allegations of fraud, to US$14 million. In May 2012, ChinaCasy was delisted.<ref name="Solomon 2011 z624">{{cite web | last=Solomon | first=Steven Davidoff | title=Year-End Surprises in Deal Law | website=The New York Times - DealBook | date=2011-12-22 | url=https://archive.nytimes.com/dealbook.nytimes.com/2011/12/21/year-end-surprises-in-deal-law/ | access-date=2024-04-09}}</ref><ref name="Harvard Law Review 2016 y546">{{cite web | title=In re ChinaCast Education Corp. Securities Litigation | website=Harvard Law Review | date=2016-06-10 | url=https://harvardlawreview.org/print/vol-129/in-re-chinacast-education-corp-securities-litigation/ | access-date=2024-04-09}}</ref><ref name="Lam 2011 s028">{{cite web | last=Lam | first=Eric | title=Canadian shortseller Sahm Adrangi targets ChinaCast Education | website=Financial Post | date=2011-11-29 | url=https://financialpost.com/investing/canadian-shortseller-targets-chinacast-education | access-date=2024-04-09}}</ref> At the time, Fir Tree Partners was the company's majority shareholder.<ref name="RTTNews 2012 z829"></ref>

==Legal issues==

===2011 board of directors dispute===

In December of 2011, ChinaCast's board of director accused Ned Sherwood, one of the directors and a company shareholder, of insider trading. Sherwood had a disagreement with the remainder of the board over a possible sale of the company, which then used the allegations to attempt to remove him.<ref name="Solomon 2011 z624"></ref> Sherwood filed a complaint in a Delaware court, and attempted to get three directors, himself included, elected to the board. The election was supervised by IVS Associates, and accountants firm,<ref name="Solomon 2012 z508"></ref> and left Sherwood in control of the board.<ref name="RTTNews 2012 z829"></ref>

===2011 fraud allegations===

In November 2011, Sahm Adrangi of Kerrisdale Capital Management LLC accused ChinaCast of falsifying its financial records to inflate its value, attract investors, and deceive the Chinese government. Adrangi stated that he had found one of the company's physical locations, an education centre for 1,200 students, "practically empty".<ref name="Lam 2011 s028"></ref>

===2012 embezzlement case===

In 2012, ChinaCast's founder and CEO, Ron Chan Tze Ngon, was accused of having siphoned US$120 million of the company's funds starting in 2008, and trying to interfere with ChinaCast's annual audit.<ref name="Harvard Law Review 2016 y546"></ref><ref name="Stevenson 2013 q395">{{cite web | last=Stevenson | first=Alexandra | title=S.E.C. Sues Former Chairman in Looting of Educational Company | website=The New York Times - DealBook | date=2013-09-27 | url=https://archive.nytimes.com/dealbook.nytimes.com/2013/09/26/s-e-c-sues-former-chairman-in-looting-of-educational-company/index.html | access-date=2024-04-09}}</ref> Chan was further accused of being involved with Harmony, a rival eduction provider,<ref name="Merced 2012 u876">{{cite web | last=Merced | first=Michael J. de la | title=Battle Over a Chinese Company Turns Physical | website=The New York Times - DealBook | date=2012-04-20 | url=https://archive.nytimes.com/dealbook.nytimes.com/2012/04/19/battle-over-a-chinese-company-turns-physical/?searchResultPosition=5 | access-date=2024-04-09}}</ref> and was removed as the company's CEO in the same year.<ref name="RTTNews 2012 z829"></ref> He and others faced a lawsuit over the theft in 2014, with the total sum of stolen money reported as US$150 million.<ref name="Bloomberg.com 2014 g333">{{cite web | title=Ex-ChinaCast Chairman Chan Sued Over Alleged $150 Million Theft | website=Bloomberg | date=2014-08-26 | url=https://www.bloomberg.com/news/articles/2014-08-26/ex-chinacast-chairman-accused-of-joining-in-theft | access-date=2024-04-09}}</ref> In 2013, the [[U.S. Securities and Exchange Commission]] won a case against Chan in which they accused him of "systematically looting the company", and was awarded US$49 million in the [[United States District Court for the Southern District of New York|Manhattan federal court]].<ref name="Reuters 2016 u182"></ref><ref name="Reuters 2013 f765">{{cite web | title=U.S. SEC charges ex-ChinaCast execs with fraud, insider trading | website=Reuters | date=2013-09-26 | url=https://www.reuters.com/article/idUSL2N0HM1N1/ | access-date=2024-04-09}}</ref> At the same time, ChinaCast filed for bankruptcy to itself purse the embezzlement case against Chan.<ref name="Reuters 2016 u182"></ref> In 2015, the [[United States Court of Appeals for the Ninth Circuit|9th Circuit]] ruled that the company can be held liable for the actions of its CEO, overruling an earlier judgement by a Pasadena court.<ref name="Business Insurance 2015 k074">{{cite web | title=Rogue executive ruling gives plaintiffs ammunition | website=Business Insurance | date=2015-11-08 | url=https://www.businessinsurance.com/article/20091108/ISSUE01/311089980 | access-date=2024-04-09}}</ref>