The RCMP is formally assessing whether to pursue a full-blown investigation of Silvercorp Metals Inc. after a Globe and Mail story showed the Vancouver company may be helping pay for a police probe against its detractors in China.
Canadian citizen Huang Kun, who contributed research to a negative analyst report that questioned Silvercorp's production from its mining operations in China, was arrested by Chinese police in December. The company strongly rebutted the report's assertions. Mr. Huang has been unable to leave the country for more than eight months while police attempt to build a case of "criminal defamation" against him.
After being released from custody in January, Mr. Huang was rearrested in July and is currently in jail in the city of Luoyang in Henan province, where Silvercorp's flagship mine is located. The Globe and Mail has obtained documents that may suggest Silvercorp and its executives were working in concert with local authorities and helping to pay for the investigation against the Canadian and his associates in China.
Copies of receipts for hotel stays made by one of the police officers investigating Mr. Huang in China appear to show they were paid for by a Silvercorp subsidiary. In a Globe interview before he was rearrested, Mr. Huang also provided licence plate numbers to vehicles he said were used to transport him by the Chinese police. The licence numbers match those of vehicles registered to Silvercorp's subsidiary in China.
As well, a court filing made by Silvercorp in New York appears to contain information from one of Mr. Huang's laptops that was seized by the Chinese police when he was arrested.
Silvercorp chairman and chief executive officer Feng Rui has strongly denied the allegations and accuses Mr. Huang and his associates, a group of short-sellers including Mr. Huang's employer Jon Carnes of EOS Funds in Vancouver, of lying and fabricating evidence. Silvercorp officials did not respond Friday to requests for comment on the RCMP probe.
Mr. Huang's detention appears to be part of a larger push-back by Chinese authorities against those challenging the business practices and credibility of Chinese firms. Legal experts have said Silvercorp's alleged actions could be a violation of both Chinese and Canadian law.
Now the RCMP is looking into the matter in response to a complaint. "What we would call this would be an assessment phase. That's what we call it. Somebody has made a complaint," said RCMP Superintendent Eric Mattson, the officer in charge of federal policing for southern Alberta.
The case is being handled by the RCMP's International Anti-Corruption Unit in Calgary. The bureau is responsible for investigating possible illegal actions by Canadian firms operating in foreign jurisdictions including cases of bribing foreign officials.
"Something that would be an offence in Canada, whether it occurs outside of Canada, is an offence in Canada," Superintendent Mattson said. In the case of Silvercorp, the Mounties will determine whether or not there is sufficient evidence to move forward and the probe "may or may not" move into a formal investigation phase, he said.
In 2011, the Anti-Corruption unit was responsible for a case that saw Calgary's Niko Resources Ltd. plead guilty to a charge of violating Canada's Corruption of Foreign Public Officials Act. Niko paid a fine of $8.2-million as part of a sentence imposed for providing the former state minister for energy and mineral resources of Bangladesh with a vehicle worth more than $190,000, as well as paying for approximately $5,000 worth of non-business travel for the same government official.
The International Anti-Corruption Unit's probe into Silvercorp is separate from an investigation opened by the Mounties' Integrated Market Enforcement Team (IMET) in Vancouver last year. The IMET investigation was launched at the request of Silvercorp after Mr. Huang, Mr. Carnes and others anonymously published the negative research report on Silvercorp last year.
Mr. Huang, who has yet to be formally charged, said in a previous interview that the Chinese police interrogating him had claimed their investigation was being conducted in conjunction with the RCMP.
Duncan Pound, an RCMP media relations officer in British Columbia, said that is not true. "We don't have any kind of joint investigation going on with the Chinese in this case."
Amanda Reid, a spokesperson for the Department of Foreign Affairs and International Trade in Ottawa, said "Canadian officials are providing consular assistance," to Mr. Huang, who is from Vancouver.
"We are in contact with local authorities and monitoring the situation closely," Ms. Reid said.
Silvercorp has previously provided third-party reports countering the short-sellers' allegations that the company has overstated its production and resource grades. The company also hired KPMG Forensics to audit its financial statements. Silvercorp said KPMG gave it a clean bill of health, although the company did not release the report to the public.