On February 28, 2013, the SEC charged Keyuan Petrochemicals, Inc., a China-based issuer, with violations of the anti-fraud, reporting, books and records, and internal control provisions of the federal securities laws. The SEC further charged Aichun Li, Keyuan’s former Chief Financial Officer, with aiding and abetting Keyuan’s reporting and books and records violations and for failing to implement internal accounting controls. SEC v. Keyuan Petrochemicals, Inc., No. 13-cv-00263 (D.D.C. Feb. 28, 2013). According to the SEC’s complaint, between May 2010 and January 2011, Keyuan failed to disclose in its SEC filings numerous material related party transactions required under U.S. Generally Accepted Accounting Principles, as well as SEC rules and regulations. The related parties included the company’s controlling shareholders, including its current CEO, and entities controlled by Keyuan’s management or their family. The SEC also alleged that Keyuan maintained an off-balance sheet cash account for the purpose paying for various items, including cash bonuses for senior officers, the CEO’s business expenses, and to fund bribes for Chinese government officials. The SEC charges that by failing to properly record these transactions on the company’s books and records, the company misstated its financial statements filed with the SEC. Without admitting or denying the claims against them, Keyuan and its CFO consented to the entry of a judgment permanently enjoining them from violations of the Securities Act and Exchange Act. Further, Keyuan paid a $1 million civil penalty and its CFO agreed to pay a $25,000 civil penalty, as well as a suspension from practicing before the SEC for two years.