The corruption scandal involving the China National Petroleum Corporation (CNPC) has extended overseas. An American law-firm has filed a class-action lawsuit on behalf of U.S. investors against PetroChina, a Hong Kong-listed subsidiary of the CNPC, and some of its executives.
The oil giant is accused of failure to disclose the corruption scandal affecting them and CNPC, which violates the U.S. Securities Act. PetroChina President and CEO Zhou Jiping and three other top executives are named in the lawsuit.
The CNPC has recently been riddled with scandals. Its four executives were sacked last week. On Sept. 4, four senior managers from PetroChina were sued in the U.S. The complaint by investors was filed against PetroChina in a New York federal court.
On Aug. 25, authorities informed PetroChina that its executives were being probed in relation to a serious disciplinary violation. Yet PetroChina didn’t disclose the information to investors until Aug. 27, a violation of the U.S. Securities Act.
An investor pointed out that on Aug. 28, PetroChina stock dropped over 3.5 percent when news broke about the probe. The company lost 21.7 billion yuan (US$3.54 billion) off the value of its Hong Kong shares and of Kunlun Energy shares.
It is speculated that PetroChina may face inquiries from the U.S. Securities and Exchange Commission (SEC). Daniel Roules, a partner at the Shanghai-based U.S. law firm Squire Sanders, said in the China Morning Post:
“I expect the SEC to respond to the Chinese investigation by asking PetroChina more questions.”
China’s 21st Century Business Herald reports that three PetroChina subsidiaries have become deeply entangled in the corruption scandal. The list includes Kunlun Energy, Wison Engineering, and Star Cable. Zhou Bin is rumored to be the big boss behind Wison Engineering.
He is the son of Zhou Yongkang, the former Politburo Standing Committee member. On Sept. 2, Wison Engineering stock plummeted 16.5 percent before trading was suspended. The suspension still continues. Observers say that this smacks of politics, which aims at purging the forces of Zhou Yongkang.