Chinese Aluminum Maker Under Fire

Aluminum products manufacturer China Zhongwang appointed auditing firm Ernst & Young to review its prospectus after media and analysts questioned the accuracy of its disclosure of major customers in the document, which convinced investors to pony up $1.3 billion in Hong Kong in an initial public offering in May.

To attempt to regain investors' sinking confidence in the company, China Zhongwang said Tuesday that it had hired Ernst & Young, one of the big four international accounting firms, as an external auditor to conduct an independent review of the sales transactions with its 10 major customers during the period from Jan. 1, 2008 to June 30, 2009. Ernst & Young will also inspect income tax documents for the financial year ended in December 2008.

The independent review is Zhongwang's latest attempt to restore its reputation as one of Asia's largest extruded-aluminum-product makers and to help its chairman Liu Zhongtian gain back his ranking as China's richest person.

Having raised 9.8 billion Hong Kong dollars ($1.3 billion) on May 8, China Zhongwang attracted broad media coverage as the biggest IPO in Hong Kong in the first half of the year and as the first company to tap over $1 billion on any global stock market for nine months.

Based on China Zhongwang's listing price of 7 Hong Kong dollars (90 cents) a share, the 45-year old Liu Zhongtian at one point reached a net worth of $3.6 billion thanks to his 74% stake in Zhongwang. That surpassed the $3 billion wealth of others on the Forbes China Rich List -- East Hope Group's Liu Yongxing, and the $3.3 billion of Country Garden Holdings' Yang Huiyan.

Yet the fame of China Zhongwang has been widely fading since Sept. 14, when mainland Chinese newspaper China Economic Observer reported that some customers named in Zhongwang's IPO prospectus did not order aluminum products from Zhongwang in 2008.

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