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The ONP short and distort tactics (at least in my opinion) generated by 2 unknown analysts (Muddy Waters) is coming to an end…Well, they are not unknown now for many..I did my due diligence myself during this whole saga..I uncovered one such recent tactic that happened last Thursday in Part Two of this article in another page…I will get into that later in this article..And please read it..It is very telling in this Saga..There are many more inconsistencies too that have already been addressed both thoroughly including documents by ONP that I don’t have time to get into all this saga since Muddy Waters made statements at the end of June on ONP being a fraud and a $1.00 stock..Especially since audited Earnings for the company on the 2nd Quarter happened Monday–August 16th and confirmed their stellar preliminary results….Actually on August 6th, Muddy Waters on their website stated they were dropping any further coverage on the stock and going else where barring any unforeseen events and letting others who are analyzing the stock continue..And they stated since an Audit Company was checking it, they stated they were moving on..What reputable company would just do that, especially during some of the company’s more telling times of audited earnings coming up and hopefully soon the truth about whether the company is a fraud or not..During their statements, they would make a disclaimer on a crazy sounding disclaimer statement as if what they were saying may not be true and to treat their statements as is or some such silliness..I am trying to be nice..ONP was their first inaugural analysis of any such stock in which they raised several statements –one is that ONP overstated revenue by 27 times the actual amount in 2008..However, ONP stated it was the wrong company which ended up at least according to ONP another Paper company with a similar English name and not theirs and that company was a much tinier company —with indeed I believe the tiny revenue Muddy Waters was stating..Lets look at the 27 times overstatements of revenue insight..Below inside brackets is an excerpt of a press release by ONP on July 6,2010:

[[[[[ Muddy Waters points to a "smoking gun" that they claim proves Orient Paper "overstated its 2008 revenue by 27 times." Their report claims that the "smoking gun" is that the audited 2008 PRC financial statements for a "He Bei Oriental Paper Co. Ltd.", which they claim is Orient Paper's China operating subsidiary, shows revenue of only RMB 16.3 million or approximately $2.4 million vs. the $65.2 million that Orient Paper claims HBOP generated in its SEC filings. Orient Paper previously pointed out that the translated English name of the entity for which 2008 financial statements were obtained by Muddy Waters did not match with the English name of HBOP. Subsequently, Muddy Waters claimed that despite the error in their translation, they have studied other corporate information of the entity they identified as being Orient Paper's China operating subsidiary and they continue to believe that this "entity" is indeed HBOP.

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Orient Paper has no knowledge about how and where Muddy Waters obtained their reports, which allegedly carry the "personal seal" of the Company's Chairman and Chief Executive Officer, Mr. Zhenyong Liu. In fact, all of HBOP's statutory audited financial statements are marked by HBOP's corporate seal, and never the personal seal of any natural person and most certainly never the personal seal of Mr. Liu. ]]]]]

Also the company confirmed that they have in excess of 25 million in cash from the latest offering..About 5 million was paid as a deposit on the new Manufacturing Machinery for new Business Ventures..About $ 5 million was paid as an initial down payment on the new machine for the Paper Business…Milestone payments would be for the rest..What fraud company would get the bank to confirm the cash balance??Hmmm…Below is confirmation as testified by a confirmation of bank account balance (entitled “Certificate of Creditworthiness” by the Industrial and Commercial Bank of China), which the Company is providing to the public via the following website..See this in brackets below:

As of 7/2/10

[[[[[ On June 11, 2010, Orient Paper transferred $25 million of the net proceeds that the Company received from the April 2010 financing to its wholly owned subsidiary "Baoding Shengde Paper Limited" ("Baoding Shengde"). Under the Company's current legal structure, Baoding Shengde is the operating entity which will own the title to new business assets and conduct the operations for the new business ventures of Orient Paper. On March 15, 2010, which was prior to the April 6, 2010, closing of the financing, Hebei Baoding Orient Paper Milling Co. Ltd. ("HBOP") made a $5.6 million security deposit to Henan Qinyang on behalf of Baoding Shengde to purchase the machinery. As of July 2, 2010, the only use of the financing proceeds is a net $4 million repayment of the March 15, 2010, HBOP new equipment advance. As of July 2, 2010, Baoding Shengde has a cash balance of RMB 142,837,284.23 (approximately $21 million) in its corporate bank account, as testified by a confirmation of bank account balance (entitled "Certificate of Creditworthiness" by the Industrial and Commercial Bank of China), which the Company is providing to the public via the following website

http://www.prnasia.com/sa/2010/07/06/201...

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. The translation of this certificate is available at the following weblink:

http://www.prnasia.com/sa/2010/07/06/201...

The rest of the net proceeds remain in the Company's U.S. bank account at JP Morgan Chase Bank to cover the regular ongoing operating expenses of the U.S. legal entity of Orient Paper. The $21 million cash held at the Industrial and Commercial Bank of China will be used to fund Baoding Shengde's future payment obligations under the installment payment schedule, commensurate with the progress made on equipment installation by Henan Qinyang.

From 8k

http://www.sec.gov/Archives/edgar/data/1... ]]]]]]]

Muddy Waters stated they believed they had the right company after they heard from ONP stated Muddy Waters identified the wrong company with a very similar English translation name…These statements among too many others that I don’t have time to get into all of them (some by others in what I believe to be manipulating the stock) tanked the stock..I did my due diligence myself during this whole saga..I uncovered one such recent tactic that happened this past Thursday..This will be in Part 2 of my article on this subject…There are many more inconsistencies that have already been addressed both thoroughly including documents by the company and others that I am not going to reharp through all of them.. Before you read further in Part 2 of my article on this, read the comments in parenthesis next..This is to update anyone who doesn’t know what is going on in this saga..Read parenthesis for anyone that doesn’t know any of the Saga going on recently with ONP…

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(ONP now has retained an audit firm Loeb and Loeb LLP that plans to work with the Company’s Audit committee to obtain a Big Four audit firm..This was first announced on July 16,2010..They planned to obtain a Big Four audit firm to conduct an independent investigation into the issues raised by Muddy Waters,LLC.. Since then (13 days later), the company announced the preliminary results of the 2nd Quarter unaudited Earnings..They were stellar ..And I doubt they would have announced the preliminary unaudited earnings with Loeb and Loeb retained 13 days earlier if the company’s management knowingly committed fraud or cooked the books..This preliminary announcement was July 29th..Just this Monday.the audited 2nd Quarters was matching the stellar preliminary results..Back up in time, on August 3rd, Loeb & Loeb LLP had retained Deloitte & Touche Financial Advisory Services Limited (“Deloitte”) to help them..They are considered a well respected Big Four Audit Firm…Now we have what I would like to call as ambulance chasing by many other law firms getting into the action just in case ONP committed some major fraud…Some show Class Action suits for nearly 10 years on ongoing investigations but they have never been resolved..But I can understand their positioning..Without such methodology, we may never get any possible Bernie Madoff’ like scams so I understand all the filings of investigation by these law firms.. I appreciate what they do)…

See part 2– ONP-Revealing Investigation Work (May Mean Triple Digits Gains To The Upside In My Opinion)

Mike Marsh currently has a Long Position In ONP and is the author of Part One & Part Two but brother Rob Marsh currently doesn’t have a position in ONP…..Please do your own independent research before you make an investment purchase..See our disclaimer.
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