China Agritech is a NASDAQ listed Chinese company that is – according to its SEC filings - in the business of manufacturing and distributing organic fertilizer.
... annual production capacity as of December 31, 2009 was approximately 13,000 metric tons of organic liquid compound fertilizers whereas ... annual production capacity for granular fertilizers as of December 31, 2009 was approximately 200,000 metric tons, consisting of 100,000 metric tons in Anhui, 50,000 metric tons in Harbin, and 50,000 tons in our newly completed plant in Xinjiang.
That makes research a little harder. This post is a summary of my research efforts.
The research efforts of course wound up against the normal epistemological problems of proving the existence or non-existence of things. In this case, if you find the plants and you count the trucks entering and leaving the plants with amounts of fertilizer on them consistent with the company filings you have proved the existence of the company and disproved the short case.
If however you do not find the plants you have not proved the short case - the plants could be somewhere else - or closed for a reason - or you could have the address wrong or any other similar snafu. It is hard - nay impossible - to prove a negative.
So - if the short case is right - the best I could expect to do is find data consistent with the short case. I did not expect to be able to prove the fraud.
Sinochem (a claimed large customer) has told us that it does not sell any Agritech products
Government officials in China told us that Agritech does not have a license to manufacture granular fertilizers, which the company claims are its largest product line.
After visiting Agritech’s reported manufacturing facilities in Beijing, Anhui, Xinjiang, and Harbin, we found virtually no manufacturing underway. The single exception was the facility in Pinggu County on the outskirts of Beijing, where the plant was not in operation on the Friday when we (Lucas McGee) visited but local people told us that it has sporadically produced some liquid fertilizer over the last year.
Plants in Bengbu, Anhui (supposedly the largest), Harbin, and Xinjiang were completely shuttered.
In Anhui, which Agritech calls its principal production facility, $400,000 worth of plant and equipment would seem slim for 100,000 tons of production capacity. We visited and found a small plant on a rutted road outside Bengbu, completely deserted.
The shortseller premises are a small plant on a rutted road whereas my contact suggested that this was a more urban plant. It would be sensible to have a fertiliser plant at an address closer to the outskirts of town, after all fertiliser is a bulk commodity and organic fertiliser smells. Moreover it is used outside towns – so premises on the outskirts of town make more sense than this site.
The company's photographic evidence
They are however not supportive of the proposition that this company produces 200 thousand tonnes (5 million 40kg bags) of dry fertilizer annually.
Several of the photos are of packaging and distributing very small quantities of liquid fertilizer. Here is one example.
Some people have noticed - that unbeknown to me - my Chinese contact took the photo of the gate from a website.
I have attached the document the Chinese contact sent me. Here it is
I agree the document is IDENTICAL to the one taken from the website. I instructed him clearly to TAKE photos -
He just says "Here is a picture of the gate". He never told me he TOOK the picture of the gate. Though my instructions to him were clearly TAKE PHOTOS.
I will follow up with photos HE TOOK.
The current state of play is this: The lawyer in the states had a colleague swing by the factory on her way home. She was visiting her family in Anhui for Chinese New Year and SHE provided photos including photos of the metalworking. She also provided the photo of the factory gate - a photo that perplexed me because it was NOT a photo that matched the photos in the Lucas McGee report.
My lawyer in Shanghai cannot explain why the photo came from the website and was not taken on her phone.
He is trying to follow this up. I will have a further follow up details when available.