China Life

Bing Zhang Ryan, a Chinese-American attorney representing large US institutional investors who sue Chinese companies, particularly US-listed Chinese companies, was one of the key members at the law firm of Lerach Coughlin Stoia Geller Rudman & Rubbins that sued China Life Insurance Co, one of the first State-owned enterprises that launched an IPO in the US market.

According to Ryan, the main allegation against China Life was that the plaintiffs found various accounting irregularities among different Chinese branches of the company via audits completed by China's National Accounting Office and China's Ministry of Finance, which included overstating revenues, understating expenses and mistreating commission accounts.

Ryan said that when the audits were ongoing through 2003, China Life actively marketed its shares in Hong Kong and the US and its shares were offered in an IPO on December 17, 2003. The allegation was that China Life failed to inform the market of accounting irregularities discovered by the NAO audit when it went IPO in the US. The plaintiffs also alleged China Life retained unqualified insurance agents to sell policies in China and invested in commercial real estate, which was prohibited by Chinese law at the time.

"We go after publicly listed companies for US securities-law violations because they carry public shareholders' money.They have to ensure the accuracy of the information they released to the market otherwise the public trading becomes a cheat," said Ryan.

As a senior securities litigator directing investigators to develop theories of the case and searching and reviewing case-related information on the Chinese websites against China Life Insurance, Ryan said nationwide securities litigators like her research US-listed Chinese companies for potential "wrong doing" on a frequent basis.

As a bilingual Chinese American, Ryan came to the US in 1993 and said she has a lot to offer in terms of giving advice to US-listed Chinese companies, particularly for companies who attempt to avoid US-led litigation.

"When Chinese companies list themselves on the US stock exchanges, they don't realize that not only their accounting books become public record, their parent company in China is also subject to auditing. The accounting records and bookkeeping of the parent company will be under open examination once the US subsidiary is publicly listed in the US. If there is any inconsistency between the two (US and China), the company runs the risk of securities litigation," said Ryan.

Attorneys like Howard Chen of K&L Gates found his services highly sought after by various Chinese companies due to his bilingual and bi-cultural background.

"Growing up in Shanghai made me understand Chinese culture and customs, my engineering study and high-tech industry experience in the US made me understand the system here in the US," said Chen.

Chen represented Chinese telecom giant Huawei as one of its early attorneys, and his clients range from global semiconductor giants such as TSMC, Acer and Wistron to Hynix and ShenZhou.

"It takes a lot of trust and confidence to build a relationship between attorney and client. To many Chinese companies, finding the right attorney is also a challenging task. The choice of the legal team can be critical when it comes to winning or losing in court," said Chen.

Tao of ShenZhou echoed Chen's comments on client-attorney relationship.

"We were very fortunate to have Howard and his team representing us from the very beginning. We had five people from our China office fully responsible on the case and 20 people in China supporting our lawyers in the front-end of the legal battle. We could not have done it without thorough communication and understanding of each other," he said.

With annual sales of $30 million in the US and after winning when it went to the International Trade Commission, Tao said ShenZhou has learned its lesson and is well prepared for any legal battle for its US market expansion. And he has a lot of advice for Chinese companies entering the US market.

"Chinese enterprises should carefully review their US strategy before coming here. We all need to learn the legal system, and respect the intellectual property. If you are doing everything right, do not be afraid of a legal challenge. The American legal system will make its justification and our case is a good example," said Tao.

Contact the writer at kellyzhang@chinadailyusa.com

(China Daily USA 09/20/2013 page20)