Carson Block Quotes
101 Carson Block Quotes (Muddy Waters Quotes, Muddy Waters Research, Carson C Block)
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[In April 2014.] You can’t fool all of the people all of the time.
Carson Block
[In April 2014.] Audits of public companies are not designed to detect fraud. Auditing standards presume that company documents are genuine and management does not make misrepresentations about their numbers.
Carson Block
[In April 2014.] Auditors don’t view themselves as fraud detectors, which is why an audit has been one of the least likely ways to uncover wrongdoing.
Carson Block
[February 2013.] When you’re in this business of short-selling, you really do your homework.
Carson Block
[In July 2011.] I don’t need to know trees to know fraud.
Carson Block
[In March 2011.] If it sounds too good to be true, even in China, it often is too good to be true.
Carson Block
[In March 2011.] We take two to three months to look at a company. The conventional investment-bank-analyst model doesn't really support doing that depth of research.
Carson Block
[In June 2011 on company financial statements.] It’s amazing what edge you can get when you just read.
Carson Block
[In June 2011.] As Bernard Madoff reminds us, when an established institution commits fraud, the fraud can become stratospheric in size.
Carson Block
[In February 2011.] The six rules of China due diligence. Rule #1 – Approach the company as a potential customer does. Rule #2 – Take all company-provided introductions with a grain of salt. Rule #3 – Try to construct your own fraud scenario. Rule #4 – Forget about the paper. Focus on the operations. Rule #5 – Always speak with competitors. Rule #6 – Do not delegate.
Carson Block
[In February 2011 on paper fraud.] In today’s world where you can buy a competent color printer for less than $200, it’s hard to understand why investors place so much faith in bank statements, invoices, and contracts.
Carson Block
[In February 2011.] Beyond all else, ask questions and never accept an answer at face value.
Carson Block
[In May 2013.] Our view is that China is a massive asset bubble.
Carson Block
The Chinese have an old proverb, “浑水摸鱼” (muddy waters make it easy to catch fish). In other words, opacity creates opportunities to make money. This way of thinking has unfortunately become endemic in global capital markets.
Carson Block
[In 2007.] China is certainly not for the fainthearted. Many businesses over the years have tried and failed. Some foreign investors have failed more than once! The good news is that we know of many success stories in China, too. You can find the path to success – you just need to know where to look for it.
Carson Block
[In 2007.] The more slowly you go and the more patient you are… the better your chances of success.
Carson Block
[In 2007.] The hard part comes when your company starts to negotiate with the Chinese. They’re tough as nails when bargaining, and they have a reputation for being some of the hardest-hitting negotiators around. Cunning is probably the best way to explain their style…
Carson Block
[In 2007.] You’ll make mistakes… Don’t expect overnight success – you’ll get there eventually.
Carson Block
[In 2007.] Ancient Chinese philosopher Lao Tzu once said, ‘A journey of a thousand miles begins with a single step.’ That’s good advice for someone exploring the China market for the first time.
Carson Block
[In 2007.] As some say, in China nothing is permitted, but everything is possible. Thank you, ambiguity!
Carson Block
[In June 2010 on Orient Paper Inc (ONP).] We are confident than ONP is a fraud. Its purpose is to raise and misappropriate tens of millions of dollars… We have determined that ONP has overstated its fiscal 2008 revenue by 27 times, and its fiscal 2009 revenue by approximately 40 times. Our determination is based on a review of public records in China, onsite due diligence at ONP’s production facility, and contacts with ONP’s purported 10 largest customers… ONP overstates the values of its assets by at least 10 times.
Carson Block
[In February 2011.] You want to see what the China side customers see. Fraudulent companies have far less confidence that they can fool a Chinese company in their industry than they do about fooling a starched shirt analyst.
Carson Block
[In February 2011.] In a country where a lot of managers earn less than $500 per month, it’s not hard for an unscrupulous company to buy someone’s loyalty for the duration of a meeting or phone call.
Carson Block
[In February 2011 on trying to construct your own company fraud scenario.] At some point in evaluating every investment, you should stop and ask yourself how you could have staged everything you’ve been shown or done with the company.
Carson Block
[In February 2011 more on trying to construct your own company fraud scenario.] This kind of thinking makes clear how surprisingly simple measures (e.g., switching factory signs before you arrive, painting old machinery) can be so effective in fooling the credulous investor.
Carson Block
[In February 2011.] China’s deal making world abounds with stories of forged bank statements and other documents leading to disastrous deals. Unfortunately, most auditors apply the US audit playbook in China – reviewing and taking documents at face value.
Carson Block
[In February 2011.] Big name auditors aren’t that well equipped to protect investors against managements who are determined to commit fraud.
Carson Block
[In February 2011.] Because China’s accounting system mandates a large amount of paper invoices, determined management can take advantage of the system to create a daunting blizzard of forged paper that a reputable auditor cannot easily see through.
Carson Block
[In February 2011.] You have to look at the operation itself. How much does the output seem to be, how much material is moving into and out of the factory, does the office seem to be a hive of activity, how many employees can you count, what is the square footage of the facilities? These are all basic questions one should concern themselves with during site visits.
Carson Block
[In February 2011 on using company site visits in relation to corporate fraud.] It pays to visit two to three (or more) times – a good fraudster can put on a show, but they’re unlikely to be able to do it the same way each time. Watch for the subtle differences.
Carson Block
[In February 2011.] If you cannot find a good way to measure the company’s sales or productivity (as in the case of a service company), you should think carefully about proceeding with the investment.
Carson Block
[In February 2011.] Competitors with real businesses can usually tell you one of two things about a fraudulent competitor – either that it’s obscure (sometimes the ‘competitor’ is hearing about the company for the first time); or, that they know it’s a fraud.
Carson Block
[In February 2011.] Many competitors will be reluctant to speak openly at first about a fraudulent competitor if they know you’re a potential investor in the fraudulent company. However, if you’re a potential customer who is shopping around for a vendor, it can be a different story.
Carson Block
[In February 2011.] A lot of experienced China investors have stories about subordinates who colluded with a target company to attempt (and sometimes succeed) to defraud the investor. Be attune to the dichotomy between the investment funds at stake and the income / wealth of the people on whom you rely for judgment.
Carson Block
[In February 2011.] The rules of the game are different in China than in the US. There are many solid companies and managements in China. However, unscrupulous people know that most US investors aren’t prepared to deal with a full-fledged attempt to defraud them in China.
Carson Block
[In March 2011 on what he does.] I am exposing what I believe are substantial frauds before they suck up more money from investors.
Carson Block
[In March 2011.] At the outset of law school, I didn't think I would practice for one day. I ended up enjoying law school so much that I decided it would make me a better business person, a better entrepreneur. After law school in 2005, 1 went to China because I figured it would offer me more entrepreneurial opportunities. I chose Shanghai because I thought the post-legal opportunities would be better. I came across a stock that was a substantial fraud. It happened to be a reverse merger, and that is how the whole Muddy Waters saga started.
Carson Block
[In March 2011.] I am exposing companies in which less than 50% of their claimed revenue actually exists. That is well beyond the realm of mistake.
Carson Block
[In March 2011.] Fraud is a willful, material deception [entered into] for the sake of a theft. This is not just aggressive accounting.
Carson Block
[In March 2011.] If a company is doing $100 million a year in revenue, claiming it is a manufacturer but in actuality is outsourcing production, that's also a form of fraud. And that may indicate profit margins may be different than what the company is claiming.
Carson Block
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