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Sino-Forest Corporation says that fraud allegations by Carson Block’s research firm Muddy Waters LLC. has been refuted by an independent committee.

On June 2, little-known Muddy Waters Research accused mainland Chinese plantation tree owner Sino-Forest Corporation of overstating the extent of its timber holdings and committing other instances of fraud. Sino-Forest CFO David Horsley and former CEO, Allen Chan, denied the allegations, but investors took fright and drove down the stock price of the Toronto-listed company.

Bloomberg reports that the committee confirmed the company’s timber assets, cash balance and titles in an interim report released today, Toronto-listed Sino-Forest said in a statement. The committee, which hired PricewaterhouseCoopers LLP to assist the probe, wasn’t able to verify the valuation of forestry holdings or reconcile some revenue.

Carson Block, Muddy Waters's director of research, questioned the validity and timing of the latest report, saying his research showed the company overstated the value of its assets, says the Wall Street Journal.

“The timing of Sino-Forest’s press release makes clear that the directors and officers are responding to the criminal investigation announced last week by the integrated market enforcement team of the Royal Canadian Mounted Police,” Block said in an e-mailed statement to the Journal.

"At the end of the day, the burden of proof is on them," he said in an interview.

The report by Sino-Forest heartened some investors, says the Journal.

Richard Chandler Corp., which says it is the company's biggest shareholder, said in a release from Singapore Tuesday that it was "encouraged" by the report, adding, "We continue to believe that Sino-Forest represents an excellent deep-value investment opportunity."

However, the report isn’t enough to “erase concerns over this kind of company,” said Tsuyoshi Shiba, who oversees $600 million as chief investment officer of Hong Kong-based Triskele Capital Management Ltd. “We are shunning these companies because there’s not enough information.”

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