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A research firm known for uncovering fraud at Chinese companies with U.S.-traded shares took aim this past week at L&L Energy, sparking a one-day 40 percent plunge in its stock.

L&L, whose headquarters is in an office park near Southcenter, says it brings American-style management to small, inefficient coal operations in rural southern China.

Since 2006, founder and CEO Dickson Lee has announced a series of coal-property acquisitions, swaps and sales that lifted its reported annual revenues to $199 million and its profit margin to 19 percent.

But a lengthy report from GeoInvesting, a Pennsylvania firm that would profit from a drop in L&L’s stock, claims the company’s many transactions mask “a shell game” and it is “booking substantial revenue from operations that have been idled for quite some time.”

L&L responded with a short statement from Dickson, calling the report “inaccurate and defamatory.”

The company said its board “is unaware of inaccuracy with respect to material facts or material omission” in L&L filings with the Securities and Exchange Commission. Later it announced that four independent directors will investigate GeoInvesting’s charges.

They may not be alone. In an interview, GeoInvesting co-founder Dan David said that within a few days he plans to share the firm’s findings — including interviews in China, as well as photographs and Chinese tax documents reproduced in its report — with officials at the SEC and Nasdaq.

GeoInvesting claims L&L has engaged in “bait and switch” maneuvers “where it claimed to come into possession of assets through swap transactions that never occurred through the exchange of assets it never owned in the first place.”

The research firm says one key L&L facility hasn’t worked since sometime last year, and it questions how that part of the business could have generated $77.6 million in revenue and $8.2 million in profit in the fiscal year ended April 30. The Hong Xing coal- washing factory, which cleans mined coal before sale, hasn’t paid taxes in China since June 2012, and locals say it was shut down around then, according to GeoInvesting.

The company said last month it has stopped operations at the Hong Xing plant and would seek a buyer.

L&L also reported this year that another facility, the ZoneLin coking plant, was traded to another mining company in exchange for two mines. But GeoInvesting says government reports show the plant was closed in 2012 and later torn down — and it questions how L&L could subsequently have swapped the property.

The research firm has challenged L&L before. It says that in January 2012 it “disproved” L&L’s claim to own a mine called Ping Yi. It says that “instead of fully addressing our findings,” L&L subsequently announced it was selling the mine back to its original owner for $31 million, about eight times L&L’s purchase price — to be paid not in cash, but in future coal shipments and other services.

GeoInvesting’s report states up front that “we are short LLEN, plan to continue to short, and have and will be active in the options market” — meaning it will profit from any stock drop.

L&L’s Nasdaq-traded stock fell 83 cents to $1.27 on record volume of 18 million shares Thursday, when GeoInvesting’s report came out. The shares reached a peak of $14 in 2010.

Clayton Fong, L&L’s vice president of U.S. operations, dismissed GeoInvesting’s claims as “scurrilous accusations” from “notorious short-sellers.”

He said its ownership claims and revenue reports are vouched for by independent auditors “and we have received unqualified opinions.” L&L is considering legal action against GeoInvesting, he added.

Joe Borich, the longtime executive director of the Washington State China Relations Council, who was an L&L director between 2005 and 2010 and just rejoined the board, also declined to comment pending the investigation.

The last China stock taken down by GeoInvesting was Longwei Petroleum, whose shares were delisted by the NYSE earlier this year after the research firm reported significant exaggerations in its financials.

But analyst David says the firm isn’t just a trash-talking short-seller. “We really consider this a righteous cause,” he says, because ridding the China market of frauds will make it easier for honest companies there to raise capital.

The Chinese government is increasingly making this kind of research difficult, detaining private Western investigators and even charging some with crimes.

While risky, investigating China operations isn’t that difficult, David says. “Our employees go and visit these locations, they interview people in the area, they interview staff, government officials,” he says. “And some of it comes straight from Chinese media.”

L&L isn’t the only Seattle-based company with Chinese operations to come under suspicion. HQ Sustainable Maritime, which raised tilapia in Chinese fishponds, collapsed in 2011 after its auditor and the head of its audit committee quit and challenged its management’s reports.

— Rami Grunbaum:

Insignia tests condo demand

British Columbia-based developer Nat Bosa has begun selling condominiums at downtown Seattle’s 707-unit Insignia, one of the largest condo projects under construction in King County.

It will be closely watched as a barometer of demand for such condos, which have not resumed their frenzied pre-recession pace of construction.

Envisioned as twin towers on a podium covering an entire city block, Insignia was stalled by the housing bubble’s burst and the Great Recession. The project, just two blocks from’s planned 3.3 million-square-foot office complex in Denny Triangle, is on the block bounded by 5th and 6th avenues and Battery and Bell streets.

Construction permits were issued in summer 2007 to Burnaby, B.C.-based Embassy Development Corp
., run by Bosa’s youngest son, Ryan. The company paid almost $50 million in November 2007 for the property.

Bosa himself took the site over because his company already had experience and a team in the U.S., a spokeswoman said. He self-financed Insignia’s construction, though his son is still a partner.

“A bank likes to give you an umbrella when it’s not raining,” Bosa said. “I put a lot of my skin into the game.”

The south tower, with 350 units, will be ready for move-in around May 2015, Bosa said, and the north tower by late 2015 or early 2016. Prices in the south tower range from the low $400,000s to more than $2 million. Among the amenities: 30 electric-car charging stations and a seventh-floor terrace and 41st-floor lounge.

“This is the beginning of a new era for Seattle,” Bosa said. Led by Amazon’s growth, “Seattle is in for an incredible ride. It’s going to be the next San Francisco.”

No other large in-city condos in the region have moved forward since the last major project of the past cycle, Escala in Seattle, broke ground in 2007.

In mid-2008, there were some 2,350 condo units under construction or in some stage of development in the region, said Dean Jones, a broker who owns Realogics Sotheby’s International Realty. Almost all of those new homes have been sold since the recovery began: Less than 30
of those new homes are available today, he said.

“Bosa’s project is well timed,” he said. “He’s pretty much the only major project going forward.”

— Sanjay Bhatt: