SEC ANNOUNCES FINAL JUDGEMENT AGAINST CHINA VALVES TECHNOLOGY, INC., AND SENIOR OFFICERS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23266 / May 20, 2015
Securities and Exchange Commission v. China Valves Technology, Inc., et al., Civil Action No. 1:14-cv-01630 (U.S. District Court for the District of Columbia)
SEC Obtains Final Judgments Against China Valves Technology, Inc. and Two Senior Officers in Fraud Case

The Securities and Exchange Commission ("Commission") announced today that on May 13, 2015, the Honorable Reggie B. Walton of the United States District Court for the District of Columbia entered final judgments by consent against defendants China Valves Technology, Inc. ("China Valves"), its Chairman and former CEO, Siping Fang ("Fang"), and its CFO, Renrui Tang ("Tang"). The final judgments: (i) permanently enjoin the defendants from future violations of the anti-fraud, reporting, recordkeeping, and internal controls provisions of the federal securities laws; (ii) order China Valves, Fang, and Tang to pay civil penalties of $575,000, $75,000, and $40,000, respectively; (iii) bar Fang from serving as an officer and director for five years; and (iv) bar Tang from serving as an officer and director for three years. The Commission today also issued an order pursuant to Rule 102(e)(3)(i) denying Tang the privilege of appearing or practicing as an accountant before the Commission with the right to apply for reinstatement after three years.

The case is the latest from the SEC's Cross-Border Working Group that focuses on companies with substantial foreign operations that are publicly traded in the U.S. China Valves was a China-based U.S. issuer formed through a reverse merger in 2007. On March 4, 2015, the Commission issued an order revoking the registration of China Valves securities pursuant to Section 12(j) of the Exchange Act.

The Commission's complaint, filed on September 29, 2014, alleged that China Valves, Fang, Tang, and Jianbao Wang ("Wang"), China Valves's former CEO, intentionally misled investors about the nature of China Valves's 2010 acquisition of Watts Valve Changsha Co., Ltd. ("Changsha Valve") in an effort to mask the subsidiary's prior investigation of violations of the Foreign Corrupt Practices Act ("FCPA") and China Valves's decision to pay sales commissions to employees that potentially violated the FCPA. The complaint further alleged that, in 2011, China Valves materially overstated income and understated liabilities incurred by a wholly-owned subsidiary, Shanghai Pudong Hanwei Valve Co., Ltd ("Hanwei Valve"), when it mischaracterized certain value added tax payments in an attempt to hide the purchase of a valve that it intended to reverse engineer.

The Commission's complaint alleged that China Valves, Fang, Wang, and Tang violated the antifraud provisions of the securities laws, Section 10(b) of the Exchange Act of 1934 (Exchange Act) and Rule 10b-5. The complaint further alleged that China Valves violated reporting, recordkeeping, and internal controls provisions of the federal securities laws, Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13. Finally, the complaint alleged that Fang, Wang, and Tang falsely certified that China Valves's filings contained no material misstatements in violation of Exchange Act Rule 13a-14, and aided and abetted China Valves's violations of the reporting and books and records provisions.

China Valves, Fang, and Tang settled the Commission's charges without admitting or denying the charges in the complaint. The litigation is continuing against Wang.

The SEC's continuing investigation has been conducted by Patrick Feeney, Sarah Nilson, Kelly Dragelin, and Janet Yang, and supervised by Melissa Hodgman. Alfred Day leads the litigation team.