Duoyuan Global Water Securities Fraud Details

Securities Class Action Lawsuit against Duoyuan Global Water
If you bought shares of Duoyuan Global Water stock anywhere between 10/9/2009 – 9/13/2010 (especially on or soon after 1/28/2010) please SIGN UP to hear more about the Class as your rights may be affected.

Timeline of Facts

Initial Public Offering

June 24, 2009: the Company commences its IPO of 5,500,000 ADSs priced at $16.00 per share.


  • Piper Jaffray & Co. with 3,437,500 ADSs
  • Oppenheimer & Co. Inc. with 1,375,000 ADSs
  • Janney Montgomery Scott LLC with 687,500 ADSs

Secondary Public Offering

January 28, 2010: the Company commenced a follow-on secondary public offering (the “SPO”) of 3,545,000 ADSs priced at $29.50 per share.


  • Credit Suisse Securities (USA) LLC with 1,559,800 ADSs
  • Piper Jaffray & Co. with 1,382,550 ADSs
  • Macquarie Capital (USA) Inc. with 177,250 ADSs
  • Rodman & Renshaw, LLC with 354,500 ADSs
  • Janney Montgomery Scott LLC with 70,900 ADSs

January 28, 2010: The Global Environment Fund (“GEF”), an initial outside investor, reaps proceeds of $23,157,500.

March 8, 2010: the Company announces its 2009 operating results, including a 32.2$ jump in revenues, operating income of $27.6 million, and diluted earnings per ADS of $0.92.

March-June 2010: the Company announces it will appear at Rodman & Renshaw’s Annual China Investment Conference; at Macquarie’s China Conference 2010; and at the Fifth Annual Piper Jaffray Europe Conference.

August 18, 2010: the Company reports Q1’10 revenues of $43.4 million USD and earnings of $0.45 per ADS compared to analysts’ estimates of $40.88 million and $0.36, respectively.

September 13, 2010: sister company Duoyuan Printing (DYP) announces the resignation of at least four members of its Board of Directors, and its CEO (defendant Holbert) and CFO, following the dismissal of DYP’s independent registered public accounting firm Deloitte Touch Tohmatsu CPA Ltd.

September 13, 2010: Piper Jaffray decreases its Duoyuan Global Water (DGW) price target from $34.00 down to $9.00 per ADS – an astounding 73.53% – based on the corporate governance and accounting issues raised by DYP’s announcement and the ties binding DGW with DYP.

September 13, 2010: Investors react, with DGW ADSs declining $8.60 per share, or 41.55%, to close at $12.10 per share, on unusually heavy volume.

September 14, 2010: Another analyst affiliated with an underwriter of the ADS offerings, Janney Capital Markets, warns investors not to rely upon its prior rating, fair value, and earnings estimates and suspended coverage of DGW, due to “lack of clarity” and the fact that the “third party review will likely take months.”

September 28, 2010: the Company announces that the international law firm, Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates (“Skadden”) has been engaged by the Audit Committee to conduct a review to verify the integrity of DGW’s accounting, internal controls and corporate governance. Skadden’s report expected within one to four months. (Source: Rodman & Renshaw March 23, 2011, report).

October 25, 2010: a research note is issued by Auriga, raising concern: (1) why is the Company undertaking a large capital expenditure program when the facilities are only about 50% utilized; (2) the capital expansion plans could drain the balance sheet; and (3) the equipment was not modern; and (4) only 10 of 109 products purportedly produced were available for inspection. Investors respond to this troubling news, with the ADS price tumbling by more than 5.5% to close at $12.83.

March 23, 2011: Chairman Guo announces very positive fiscal year (“FY’10”) 2010 results, touting revenues of over 1 billion RMB. Because the Audit Committee and Skadden has not yet obtained access to documents requested for the review, the Board announces that it is unwilling to approve or otherwise ratify the presentation of the Q4’10 or FY’10 operating results. However, DGW indicates that the review could be completed by the end of Q2’11, provided that the Audit Committee and Skadden obtain access to the requested documents. In response to this public airing of concerns by the Board, the ADSs falls 11.7% on heavy trading volume.

April 4, 2011: Muddy Waters issues a scathing report valuing DGW’s shares — trading at $5.49 on April 1, 2011 — at less than a dollar. Muddy Waters accuses DGW of, inter alia, replacing the actual 2009 audit report for DGW’s manufacturing arm (“DGW Langfang”) on file with the local Administration for Industry and Commerce (“AIC”) with a phony version (containing the figures reported to investors) and forging its auditors’ name and seal on the latter report. Revenues of $800 thousand (USD), at most, in 2009 and 2010 were astronomically-inflated and reported to the market at $114.8 million in 2009 and $154.4 million in 2010. The report states that DGW’s auditors, Grant Thornton International’s (“GTI”) Hong Kong office — which was later asked to leave GTI — are “inattentive” and “sloppy,” with respect to specific items in its audit, such dereliction of duty ultimately allowed DGW to perpetrate a “massive fraud.” (The Muddy Waters, LLC, April 4, 2011, Research Report, entitled “Clean Water, Dirty Money” is hereinafter referred to as “Muddy Waters Rpt.”).

April 4, 2011: Muddy Waters posts a video on YouTube demonstrating lack of operating telephones at the numbers listed for various of DGW’s sales offices.

April 4, 2011: CFO Park announces he is leaving DGW “to pursue another professional opportunity.”

April 4-5, 2011: Investors dump their holdings in droves; DGW’s ADSs loses more than 41.5% of their value. Specifically, an extraordinary volume — nearly 16 million — of the Company’s ADSs change hands, with DGW closing at $3.99 on April 4, 2011, and only $3.21 on April 5, 2011.

April 6, 2011: trading of DGW halts (at $3.21) with “news pending.” The Board of Directors expand Skadden’s as-of-yet uncompleted review, with the assistance of an independent accounting firm, into a “more thorough and exhaustive third-party investigation,” adding business practices and finances to its scope. A five-member Special Investigation Committee (“SIC”) forms with Defendant Larrea as its chair; Larrea planned to devote herself to the on-site investigation.

May 4, 2011: with trading still suspended, DGW finally breaks its silence, announcing the resignation of the four independent directors (their letter of resignation detailing management’s refusal to provide access to the information required for the investigations), the appointment of replacement directors, and the action of the newly reconstituted SIC to hire Baker & McKenzie (“Baker”) as its special counsel — with Baker to, in turn, retain an accounting firm to assist in the investigation.

As a result of Defendants’ acts and omissions alleged herein, and the precipitous decline in the market value of the Company’s ADSs, Lead Plaintiffs and other Class Members have suffered significant losses and damages.


This action is brought on behalf of all purchasers of the securities of Duoyuan Global Water, Inc. during the period November 9, 2009 through September 13, 2010, inclusive (the “Class Period”). The Complaint charges the Company and certain of its executive officers with violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and S.E.C. Rule 10b-5. The Complaint alleges that throughout the Class Period defendants knew or recklessly disregarded that their public statements concerning Duoyuan Global Water’s business, operations, and prospects were materially false and misleading. Specifically, defendants made false and/or misleading statements and/or failed to disclose, among other things, that: (1) due to the substantial interconnection between Duoyuan Global Water and Duoyuan Printing, Inc. (“DYP”) – a Beijing, China-based manufacturer of commercial offset printing presses – the existence of accounting improprieties and ineffective internal controls at DYP could negatively impact Duoyuan Global Water; and (2), as a result, during the Class Period the defendants lacked a reasonable basis for their statements about Duoyuan Global Water, its business, operations, prospects and growth.

On March 3, 2011, Judge George B. Daniels signed the order granting the motion to appoint Hoi Ming Michael Ho and Joseph E. Sciarro to serve as lead plaintiffs. The law firm Glancy Binkow & Goldberg LLP was approved as lead counsel for the Class. On June 15, 2011, the plaintiffs filed an Amended Complaint.


For more information please write to info@duoyuanglobalwater.com


  • To learn about Duoyuan Global Water via the U.S. Securities and Exchange Commission, view its company filings here.
  • To research historical stock information for Duoyuan Global Water via Google Finance, click here.
  • For direct information from the Duoyuan Global Water website, visit their homepage here.