NQ Mobile, Inc. NQ
NQ Mobile's independent-committee fraud probe is structurally compromised; Muddy Waters offers to fund Plante & Moran to audit the auditors and protect investors from another China-fraud whitewash.
Thesis
Muddy Waters, having previously alleged NQ Mobile is a fraud, writes to NQ's independent committee offering to pay for Plante & Moran PLLC to oversee and evaluate the committee's own fraud investigation, which is being run by Deloitte FAS under Shearman & Sterling. Carson Block argues the committee has cloaked the probe in attorney-client privilege with no good-faith justification, and cites eight prior China-issuer cases — Sino-Forest, China Agritech, ChinaCast, China Integrated Energy, China Medical Technologies, Duoyuan Global Water, Sino Clean Energy, and Silvercorp — where committee exonerations were followed by 75% to near-total investor losses, delistings, bankruptcies, and SEC/OSC fraud charges. The offer demands Plante & Moran get unrestricted access to all working papers, primary sources, and advisor interviews, with the evaluation published to investors. The deadline is January 7, 2014.
SCQA
NQ Mobile's independent committee, advised by Deloitte FAS and Shearman & Sterling, is investigating Muddy Waters' fraud allegations and has pledged transparency to shareholders.
The investigation is shrouded in attorney-client privilege and follows a pattern: in eight prior China-issuer cases including Sino-Forest, committee exonerations preceded total collapses, regulatory action, and bondholder losses.
Accept Muddy Waters' offer to fund Plante & Moran PLLC, with full access to working papers and primary sources, to independently evaluate whether the committee's investigation is credible, and publish the result.
Investors gain genuine transparency into a critical investigation; a favorable Plante & Moran evaluation would lend the committee real credibility instead of the discredited self-clearance pattern of prior China issuers.
The three reasons
- 1
Eight prior China-issuer independent committee exonerations were followed by 75-99% investor losses
- 2
Shearman & Sterling previously cleared China Integrated Energy, which then collapsed
- 3
Attorney-client privilege has no legitimate purpose if directors are not complicit
Primary demands
- Independent committee should accept Muddy Waters' offer to fund Plante & Moran to evaluate the integrity of the fraud investigation
- Committee must waive attorney-client privilege over the investigation to ensure transparency
- Plante & Moran must receive unimpeded access to all working papers, primary sources, and direct communication with Deloitte FAS and Shearman & Sterling
- Final evaluation report should be published to NQ shareholders
KPIs cited
Pattern membership
Where this document fits across the library's 12 rhetorical / structural patterns.
Precedents cited
- Sino-Forest (Muddy Waters short, OSC fraud charges, bankruptcy)
- China Agritech (~95% equity loss post-exoneration)
- ChinaCast Education (FTI cash verification, then 99.5% loss)
- China Integrated Energy (also advised by Shearman & Sterling)
- China Medical Technologies (Nasdaq de-listing, liquidation)
- Duoyuan Global Water (Muddy Waters short, ~95% loss)
- Sino Clean Energy (Nasdaq de-listing, ~93% loss)
- Silvercorp (KPMG Forensic clearance; alleged bribery of Chinese police)
Notable slides (4)
Notes
Open letter addressed directly to NQ Mobile's four independent directors, signed by Carson Block. Not a stand-alone short thesis on NQ — it presupposes Muddy Waters' prior fraud reports on NQ and instead attacks the credibility of the company's defensive independent-committee investigation. Strong rhetorical device: lengthy precedent catalogue (8 China-issuer cases, each with Bloomberg price chart showing post-exoneration collapse). Uses verbatim management/committee statements from Sino-Forest, ChinaCast, China Integrated Energy, China Medical Technologies as 'famous last words' contrast. Shearman & Sterling specifically named as having previously advised China Integrated Energy. Document contains 5 small Bloomberg stock-chart screenshots (pp. 4-7); otherwise plain Times-style letter formatting with Muddy Waters logo on p.1.