Opinion ID: 2789180
Heading Depth: 3
Heading Rank: 2

Heading: Hilead transaction

Text: The investors additionally allege that Jiangbo was involved in a material related-party transaction with Hilead that none of Jiangbo’s principal officers, including Ms. Sung, properly disclosed in filings or public statements. The investors first learned that this transaction might have occurred from the resignation letter, dated June 6, 2011, of two of Jiangbo’s independent board members who sat on the Audit Committee (the “resignation letter”). The resignation letter noted that the Audit Committee had issued unsatisfied requests for bank slips showing receipt of the same amount—RMB 200 million, or roughly 8 Using the conversion rate contained in the complaint, the dollar equivalent would have been approximately $341,000. 6 Case: 14-10213 Date Filed: 03/25/2015 Page: 7 of 24 $31 million—from both Jiangbo and Hilead. The letter further stated that the Audit Committee was awaiting an “Auditor’s Verification Report on the capital injection in relation to the RMB 200 million capital of Hilead . . . .” Doc. 43-1 at 20-21. Given Mr. Cao’s control of Hilead and the size of the transaction relative to Jiangbo’s stated cash balances, the investors allege that any such transaction was necessarily “material” and should have been disclosed. Thus, the investors claim that Ms. Sung’s certification of filings and statements to shareholders made material omissions under the meaning of 17 C.F.R. § 240.10b-5 insofar as they did not reference the Hilead transaction.