SEC Sues China-Focused Investment Company

Hartcourt Cos., an investment firm specializing in high-growth Chinese companies, raised $800,000 illegally by misrepresenting the purpose of 1 million shares of stock, the Securities and Exchange Commission alleged Wednesday.

Hartcourt was based in Long Beach when the alleged offenses occurred in late 1999, the SEC said in a lawsuit filed Tuesday in federal court in Los Angeles. The company has since closed the Long Beach office and now operates from Shanghai, said its attorney, John Furutani of Sherman Oaks.

In a statement, Hartcourt denied wrongdoing and pledged to vigorously contest the charges.

The SEC alleged that former Hartcourt Chairman Alan Phan and another man, Yongzhi Yang, registered the 1 million shares as compensation for Yang’s wife, purportedly for consulting services. But Yang’s wife had performed no services for Hartcourt, and the men instead used the stock to raise capital for the company, said John Bulgozdy, senior trial counsel in the SEC’s Los Angeles office.

The SEC is seeking permanent injunctions and fines against Hartcourt, Phan and Yang, along with court orders requiring the men to repay the money raised, plus interest. In addition, the SEC is seeking to bar Phan from serving as a corporate officer or director.

Furutani, who represents Phan as well as the company, said the firm’s securities lawyers had approved the stock transaction. Yang’s lawyer, Irving M. Einhorn, didn’t immediately return a call seeking comment.

Hartcourt shares fell 16 1/2 cents to 49 cents in over-the-counter trading.