Embattled Chinese oil producer PetroChina has been sued in the U.S. by an investor claiming the company’s failure to disclose details of a corruption investigation in China exposed him to the risk of penalties and criminal charges, according to the China Compliance Digest.
The complaint, filed by law firm Pomerantz Grossman Hufford Dahlstrom & Gross on behalf of Belgian investor Johan Broux, represents all buyers of PetroChina shares. It names PetroChina’s former chairman Jiang Jiemin, current chairman Zhou Jiping, former chief financial officer Zhou Mingchun and current chief financial officer Yu Yibo.
Their failure to disclose the corruption probe into PetroChina meant investors were unprepared when share prices fell by more than 3.5% once news of the investigation broke. According to Pomerantz, PetroChina’s financial statements were “false and misleading.”
PetroChina and parent company, China National Petroleum Corp (CNPC), are the subject of a growing corruption investigation in China that is rumored to involve some top names, including former Politburo Standing Committee Member Zhou Yongkang and his son Zhou Bin.
This is the latest in a string of charges against the CNPC group. In August, China’s Ministry of Environmental Protection (MEP) stopped approving new refinery projects and upgrades to existing facilities after CNPC failed to meet pollution targets for 2012.
According to Daniel Roules, a partner at law firm Squire Sanders, “banks and capital markets will be less willing to put their money with a company that has earned a reputation for falsifying financial statements, so PetroChina’s cost of doing business will increase as a result of the undisclosed corruption.”