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10 | Friday - Sunday, April 26 - 28, 2013 THEWALL STREET JOURNAL.

OPINION

More than four months afterthe U.S. Securities and ExchangeCommission filed suit against fiveaudit firms in pursuit of allegedfraud at Chinese companies listedon American exchanges, the regu-lator has precious little to showfor its efforts. Considering earliercharges filed by the SEC againstone of the auditors, Deloitte, forthe same reasons back in 2011, theresults are even more dismal.

This isn’t for lack of trying.Rather, the SEC is focusing on thewrong target.

The SEC’s legal actions stemfrom a string of accounting scan-dals at Chinese companies listedon the NYSE and NASDAQ mar-kets—scandals alarmingly echoedwith Chinese listings in Canada,Hong Kong, and Europe as well.The typical pattern is that a short-selling investor produces a damn-ing research report suggestingthat a listed company has some-how cooked its books. Regulatorsand other investors then struggleto uncover the truth.

To better assess such fraud al-legations and ensure regulatorycompliance, the SEC wants to in-spect the audits of suspected com-panies’ operations in China. Thisnaturally requires access to infor-mation about how accountingfirms conducted their audits on

those companies. These recordscan shed light on how a companymight have deceived its auditors,or, conversely, on whether auditorswere sufficiently aggressive in fol-lowing up on red flags.

So far Washington has beenthwarted. Accountants say thatChina’s state secrecy laws bar themfrom releasing audit working pa-pers, and they may be right. Bei-jing has never explicitly approvedsuch information sharing withWashington, which might amountto a ban under China’s regulatorysystem. Washington’s inquiriestouch on sovereignty issues aboutwhich Beijing is particularly sensi-tive.

The key to resolving the impas-seis in the SEC taking a differentapproach with Chinese authorities.The U.S. regulator says in its latestcourt filing on the matter thatsince 2009 it has sent 21 requestsfor help on 16 different investiga-tions to its counterpart, the ChinaSecurities Regulatory Commission(CSRC). American critics say that alack of “meaningful assistance”shows that the Chinese bureau-cracy is unwilling to help wrongedAmerican investors get justice.

In reality, the Commission hasbeen chiefly thwarted by CSRC offi-cials’ lack of clear authority to han-dle SEC requests. In other words,Washington has not been dealingwith the people in Beijing who can

definitively say “yes” to the SEC.Signs indicate that the CSRC has

tried to explain this on several oc-casions. In September 2011, the SECfirst broke from negotiating withChinese officials over access to au-dit records and started litigationagainst Deloitte Shanghai, the BigFour accounting firm’s’s China affili-ate. In subpoena documents it sub-mitted in U.S. District Court, theSEC said the CSRC already had indi-cated the Chinese regulator lacked

the power to allow Deloitte to handover desired documentation. Thecourt filing recounts how the CSRCsaid it needed consent from at leastthree other agencies—the Ministryof Finance, the State Secrets Bureauand the State Archives Bureau.

The SEC later shelved that liti-gation against Deloitte and re-newed negotiations with the CSRC.Then, in November of last year,the Chinese regulator told itsAmerican counterparts that to sat-isfy the SEC’s desire for unfetteredaccess and use of Chinese audit

work papers, the CSRC would stillhave to consult with other Chinesegovernment authorities—a processrequiring an indeterminate amountof time. And so the SEC decided torelaunch its case against Deloitteand broaden legal action againstan additional four multinationalauditors for good measure.

The CSRC may well have beendeploying some delaying tactics.But the agency also operates withinstitutional constraints thatstrictly limit its authority. Chineselaw remains vague on who has ul-timate responsibility for release ofaudit documentation on Chinesecompanies listed overseas; theCSRC is only one of several gov-ernment bodies in the mix. The re-percussions for CSRC officials ifthey overstep their bounds—espe-cially in matters involving perenni-ally testy Sino-American rela-tions—could be severe.

In this light, the SEC’s best wayforward is to appeal to higherpowers. If it does, Washington mayfind it has the support of theagency it now deems uncoopera-tive. In January, Chinese media re-ported that the CSRC had joinedthe Ministry of Finance in submit-ting a proposal to the State Coun-cil, China’s highest administrativebody, for U.S.-China cooperationon audit inspections. Coupled withother statements by CSRC officials,there’s ample reason to believe the

CSRC genuinely wants resolutionon this issue. Rather than brow-beating the commission, Washing-ton should support it.

That would entail a shift awayfrom negotiations directly with theCSRC, and away from litigious ac-tions that only trap auditors in thecrossfire. Instead, senior U.S. offi-cials should lobby their high-rank-ing Chinese counterparts. From thisperspective, Treasury SecretaryJack Lew missed an excellent op-portunity to raise securities-regula-tion cooperation with President XiJinping when the two met inMarch.

The focus should be on per-suading Chinese officials thatChina has a stake in cooperation,too—both in terms of its reputa-tion and in terms of its companies’ability to continue listing abroad,something that’s in jeopardy ifWashington and investors no lon-ger trust audits of Chinese compa-nies. It’s time for the SEC to aban-don a failed strategy and moreeffectively try to bring justice toscammed shareholders and pro-vide an environment of unambigu-ous accountability for Chinesestock listings in America.

Mr. Koepp is the author of “Bet-ting on China: Chinese Stocks,American Stock Markets, and theWagers on a New Dynamic inGlobal Capitalism” (Wiley, 2012).

BY ROB KOEPP

The SEC’s Misguided China Fight

Rather than continue itslewsuit against auditors, theU.S. regulator should lobbyBeijing leaders for greatercooperation on transparency.

Almar Latour, Editor in Chief, AsiaDean Napolitano, Senior Editor

Miguel Gonzalez Jr., Senior News Editor

Hugo Restall, Editorial Page Editor

Wendy DeCruz, Institutional Sales AsiaCharlotte Lee, Circulation SalesMark Pope, Advertising Sales

Shawn Hiltz, MarketingSimon Wan, IT

Published since 1889 byDow Jones and Company

© 2013 Dow Jones & Company. All Rights Reserved

If you delight, as I do, instrange, colorful animals, and liketo see a lot of them at the sametime, the usual strategy is to visitislands, where isolation has a wayof breeding eccentricity. But overthe past few decades, Vietnam hasrevealed itself, improbably, as asort of mainland Madagascar. It is amother lode of newly describedspecies, many of them upland refu-gees in a region cut off from main-land Asia during the ice age.

Recent discoveries there includea tube-nosed bat named M. beelze-bub for its devilish good looks, awalking catfish, a striped rabbit,and, just this year, a flying frog anda turquoise-headed crocodile lizard.The saola, a large forest-dwelling

antelope first described in 1992, isso odd that it required the inven-tion of a new genus, Pseudoryx.Since no one has been able to keepa saola alive in captivity, the spe-cies remains an enigma—and anenigma that is probably en route toextinction: Vietnam resemblesMadagascar not just in the diver-sity of its wildlife but in its cata-strophic rush to destroy it.

You might think that outsidershad already taken care of that.During what is known there as“the American War,” U.S. forcesdoused Vietnam with about 20 mil-lion gallons of herbicides and defo-liants, destroying 7,700 squaremiles of forest. Earlier, in theFrench colonial era, a single big-game hunter in the AnnamiteMountains gunned down 600 deer,50 tigers and panthers, and 40 ele-phants (about as many as now sur-vive in the entire nation).

But the era of mass extinctionshas really taken off as Vietnam hasdeveloped into an economic power-house, with average annual GDPgrowth of 6.3% over the past dozenyears. The rising middle class hasso far developed an appetite for thenatural world only in the most lit-eral sense: The craving for exoticmeats and traditional medicines of-ten leads to what naturalists call“empty forest syndrome.” In 1992,for instance, Vietnam designatedCát Tiên National Park, north of HoChi Minh City, as a reserve formainland Asia’s last population ofJavan rhinos. But the governmentnever provided adequate protec-tion, particularly during a world-wide rhino-poaching crisis said tobe largely driven by Vietnam itself.At Cát Tiên in 2010, poachersbutchered the nation’s last surviv-

ing rhino for the imaginary medici-nal value of its horn.

In “Gold Rush in the Jungle,”science writer Dan Drollette Jr. at-tempts to tell this story of discov-ery amid pell-mell destruction. Hefocuses primarily on the work ofTilo Nadler, an East German immi-grant whose Endangered PrimateRescue Center south of Hanoi hasbecome a final refuge for many spe-cies, including some rescued fromVietnam’s rampant illegal traffic inwildlife and some new species dis-covered by Mr. Nadler’s team.

Having started in 1993 with afew acres and a budget of just$20,000 a year, Mr. Nadler nowmaintains about 15 species in cap-tivity, mainly highly endangeredmonkeys. To critics who argue forprotecting whole habitats ratherthan plucking out a few charis-matic species for captive breeding,Mr. Nadler replies: “The biggestproblem in Vietnam is that there isno time for education on environ-mental issues. It takes twentyyears to see the effects of an edu-cation program, and these speciesdon’t have even ten years. . . . Youcan’t put animals back in the wildif they are extinct.”

It is a timely story, and withplenty of potential take-home. Mr.Drollette points out, for instance,that the U.S. is by far the biggest

customer for wood furniture fromVietnam. That bedroom set withthe attractive price tag? It oftencomes at an unspoken cost: We aresupplying the cash to cut down theforests where Mr. Nadler’s mon-keys used to live.

Unfortunately, “Gold Rush inthe Jungle” is a dismally ineptbook, starting with the title,which risks reinforcing the wide-spread suspicion in emergingcountries that naturalists aresomehow cashing in on their dis-coveries. Mr. Drollette even quotesan unintentionally hilarious linefrom Michael Crichton’s novel“Congo” about a biologist drivento discover new species by “his in-sensate lust for fame.” (Look foryour favorite taxonomist edgingKim Kardashian off the cover ofnext week’s People magazine.)

The book’s flat-footed languageoften sounds like the narration in aWes Anderson film, minus theirony: “His take on the situationwas that the horror and the beautyassociated with the country coex-isted simultaneously, much likewhat is found in Mother Nature.”It’s also riddled with minor errors.It wasn’t Ernst Mayr who coinedthe term “island biogeography”; itwas Robert MacArthur and E.O.Wilson. It wasn’t other biologistswho said “God created, Linnaeusarranged”; it was Linnaeus himself.And on a personal note, it wasn’t“some scientists” who proposedcreating a “Wall of the Dead” tocommemorate the naturalists whohave lost their lives in the searchfor new species. That was me, andI’m a writer, not a scientist.

But the real problem with thisbook is that Mr. Drollette almostnever takes the reader out into the

forest to show us through his owneyes just what we are losing. Heseems to consider a 25-minute walkfrom a paved road a voyage intoVietnam’s “lost world.” He getsunnerved being alone in a roomwith, of all things, a captive civet, asmall, mongoose-like mammal witha fondness for fruit, coffee beansand fermented palm sap. His bigwildlife encounter involves themoths gathered on a bedsheet undera porch light in Mr. Nadler’s yard.

It is a pity, because there is stilltime for the outside world to helpVietnam protect the natural won-ders that are its best real shot at asustainable future. Or maybe weshould just despair. When Vietnam-ese VIPs tour his captive breedingfacility, Mr. Nadler tells Mr. Droll-ette that they often conclude bysaying: “We’ve seen your animals.Where’s your restaurant? Now wewant to eat exotic animals.”

Mr. Conniff is the author of “TheSpecies Seekers: Heroes, Fools, andthe Mad Pursuit of Life on Earth.”

[ Bookshelf ]

BY RICHARD CONNIFF

The Quiet Zoologist

Gold Rush in the JungleBy Dan Drollette Jr.(Crown, 310 pages, $25)

Species discovered inVietnam include a walkingcatfish, a flying frog, and abat dubbed ‘Beelzebub’ forits devilish good looks.

THEWALL STREET JOURNAL. Friday - Sunday, April 26 - 28, 2013 | 23

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FOCUS ON OSAKA CITY

Even its fondestadmirers admit that,historically, Osaka isa city with an imageproblem.Themost

glowing epithet Meiji-eravisitors could manage was “theManchester of the East,” acomparison with the British citythat was a center of theIndustrial Revolution. Morecontemporary commentatorshave called it one of Japan’sgrimiest, most cramped andchaotic metropolises.

But Osaka—with its 2.6 millionresidents and $2.66 billion GrossCity Product—is an energetic,business-savvy, easy-going city,even if not the prettiest. Alas, if ithas had a hard time attractingtourists, it hasn’t always beensuccessful at attracting investorseither. Most overseas anddomestic investors have beenunable to see beyond Tokyo.

“In Japanese, we call itikkyokuka, whichmeans ‘single

polarity’, and as we know, that isan unnatural state,” explains KeiFuruta, managing director of theJapanese arm of Equinix Inc., theworld’s number-one intercon-nective data center business,with centers in 31 strategicmarketsacross the Americas, EMEA andAsia. Soon, with the plannedopening of its new data center,there will be one in Osaka too.

This is a source of pride to acity growing in confidence aftersome time in the commercialdoldrums. “More andmorecompanies are coming in, notleast with the 24-acre redevelop-ment of the Umeda Kita Northarea, and the opening of theseven-acre Grand Front Osaka,with its 1,700-seat conventionhall and state-of-the-art com-mercial, retail and entertainmentfacilities,” says Kazuhiro Nose,the city’s erstwhile businessdevelopment officer. “These areexciting times.”

Mr. Furuta cites the city’s“robust, business-friendly politicalleadership,” under Mayor Toru

Hashimoto, and its freedomfrom the web of bureaucraticrestrictions that ensnares Tokyo,as positives. “The city andprefecture are also doing a farbetter job than Tokyo in makingcommercial, financial andlogistical information availableto would-be investors.”

Osaka’s business has alwaysbeen business. Shonin noMachi, “the city of merchants”,boasts a healthy per-capita GDPof $71,000, and its total GDPoutstrips that of Singapore andthe Philippines. Yet it is notwithout other key talents.

“What people maymiss is thecreativity here,” explains Mr.Furuta, talking about the citythat saw the birth of Panasonic,Sanyo, instant noodles, vacuum-packed food and the desktopcalculator. “Don’t forget that theworld’s first futures exchange—in rice—was in Osaka,” he says.

“Now they are creatingsomething very interesting withGFO—and especially interest-ing is the Knowledge Capital.They are seeking synergisticcreative solutions.”

Mr. Furuta is referring to theunique development within theGrand Front Osaka complexdevoted to bringing togethercompanies and research institutes,specialists and creators, in theunique complex that its chiefproducer,TakuyaNomura,describedas a “Silicon Valley of the mind”.

“We were very aware that it[was] going to be a prestigiousaddress when [we] decided toopen our offices in Grand FrontOsaka,” says Shigeru Takahashi,chief of big-data managementspecialists Insight Technologies,“but what really attracted us[was] the new spirit of innovation.The rules of the business gamehave changed: it’s a collaborative,mutually beneficial commercialenvironment that we want tofoster and be part of now.”

Insight Technologies’ clientlist is kept confidential, but aglance at the sponsors of itsgroundbreaking databasetechnology-sharing event, whichbrings together ORACLE expertsfrom the U.S., Britain and Japan,fromMay 29th-31st, shows thatthere is serious corporate interestin their and the KnowledgeCapital’s ideas.

The city’s hopes for economic

resuscitation are pinned in nosmall part on the success orfailure of the Umeda Kitaredevelopment plans.

Mr. Furuta, however, urgessome caution: “Building a largebox won’t guarantee instant

economic success.The key willbe if the project attracts investorsfrom outside the region—andindeed outside Japan—and asthings stand, there’s still a gapbetween Osaka’s potential and itsreality. It’s something of a gamble.”

By John Ashburne

The spirit ofinnovationcalls investorsThis ciTy is growing in confidence, Thanks To iTsforward-looking new commercial developmenTs

Osaka (above) boasts 2.6 million residents and a $2.66 billion GrossCity Product. The seven-acre Grand Front Osaka development (left)is attracting an increasing number of companies into the city.

“more and morecompanies arecoming in.”

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