Complaint and Report Method of Fraud Behaviors of CREG

 

        1.        Summary

In order to satisfy the Sarbanes-Oxley Act issued in 2002, and the compliance requirements of listing rules of American exchange, China Recycling Energy Corporation (the “company”) establishes the Complaint and Report Method of Fraud Behaviors, which stipulates related inner financial control, audit matters and disposal procedure for employee’s anonymous document submission about suspicious items of finance and audit, defines related rights and obligations to dispose complaint, accept and investigate suspicious problems about confidential finance or audit. This rule shall be revised comply with correlative regulations’ amendment
The company forbids any retaliation against any employee who participates in investigating suspicious financial audit items or honestly reports a concern about possible frauds.
2.        Target establishment
The Sarbanes-Oxley Act and the compliance requirements of listing rules of American exchange requires companies to establish report system for accepting and disposing violations about finance, inner finance control and audit items. As the important and special meanings of the audit items, no matter whether employees report or complaint for the irregular audit or finance matters by the rule or not, the company shall reserve the right to investigate irregular audit or finance items itself.
The procedure of disposing suspicious finance items shall be changed by the correlative items’ special characteristic. The significant and serious financial items disposal procedure is different form the non-significant and serious financial items. According to the established targets by the method, the important financial items are as the following:
1、decisions made by the company officials, or
2、malicious act or misleading behavior, or
3、implementing responsibilities with goodwill but do violations of company management rules.
Implementing responsibilities with goodwill includes responsibilities and obligations referring to finance made by correlative laws, regulations and the company management rules comply with the definition of GAAP.
3.        Responsibilities and obligations
The company encourages and supports employee to report any violation
The officials have the obligation to report any violations, no matter whether the violation is found by him or not, or found by other ways, including through communication with employees. The officials also have the obligation to focus on the development of correlative items within their authorities
Any person who finds violations should immediately report it to ensure correlative departments could adopt disposal measures.
According to the Audit Committee Charter, it has the direct rights to supervise and check the fraud behaviors, and is entitled to accept and dispose any complaints about fraud directly.
The audit committee shall publish the complaining telephone number, fax or email, and adopt correlative safety confidential measures to protect the legal rights of the person who reports the violation.
The audit committee shall assess the validity of the report way, audit and revise the report process to ensure the report way to be proper and confidential.
The audit committee shall periodically (half a year at least) listen to the summary report of fraud from general auditor, and shall dispose them comply with the company information disclosure system.
4.        Ways for reporting
The company’s audit committee is the special organization to disposal complaints, employees shall adopt the following ways to report the violation to audit committee:
1、Calling the hotline number 86-29-88095544 , this number is also for anonymous complaints.
2Contacting to any member of audit committee or non-executive director
3Sending E-mail to wbjbyx@creg-cn.com
4Sending fax to:86-29-87651140
Mailing a written description of the concern or complaint ( anonymity is allowed)  to  :
Ku Guohua
         12/F Block A, Chang’an Metropolis Center
         No. 88 Nan Guan Zheng Street
          Xi’an, China
         Post: 710068
Employees could select bypassing or multi-department to do complaint or report. Departments to dispose these complaints or reports may be any management officials who are not connected with the fraud, including inner audit department, director of the human resource department, general manager, board chairman or chair man of the audit committee etc..
Above personnel has the obligation to treat all submissions as confidential, and report them to the correlative responsible person of the audit committee by report procedure.
 
5.        Settlement for Fraudulent Practices
Whether received report or perceived the fraudulent practices through other means, Internal Audit Section should report the message to the Auditor, and the General Auditor will judge the fraudulent practices independently or consult the Legal Counsel of the company. The important matter should be reported to the Audit Committee immediately.
If the fraudulent practices involves the following practices:
A.Disobey the practices settled by the relevant laws and regulations or by the relevant system;
B.Malicious behavior or misleading conduct;
C.The Legal Department of the company should investigate the aforementioned matters, and provide investigation report and the legal opinion to the direct manager. If the matter involves any member of the Legal Department or the direct manager of the Legal Department fails to take investigation measures, the Director of the Legal Department should report the above-mentioned report and legal opinion to the chairman of Audit Committee directly.
If the fraudulent practices involves the following practices:
A. Disobey GAAP rules, the relevant GAAP management system or procedures which the company involves; or
B.Acts performed by the management outside the reach of the Legal Department.
The Internal Auditor of the company should organize to investigate the above matters. If the matters refer to any subordinate of the Internal Auditor or any member the Auditor is responsible for directly, the Internal Auditor should report to the chairman of the Audit Committee directly.
The investigators who are responsible for the above-mentioned matters have rights to ask any people or any sub-branch to cooperate with them and answer questions. The people and sub-branch should report to the investigators about the investigating matters, and they can not answer questions according to the primary manage channel.
Character of the investigation is named according to the range and content of the report. In most cases, the investigation should include:
A. Talk face to face with the complainant/whistleblower or others who may know the truth;
B.Collect, check and keep all the relevant files, records, including E-mails and sound messages.
C.In the process of the investigation, give chance to the people who may bear the unhealthy consequence to react to the investigating matter.
Generally, the above-mentioned investigation should be finished in 30 business days, except that the extension is necessary because of the special situation.
After the investigation is finished, investigators should send the result of the investigation to the Chief Law Officer, Chief Financial Officer, General Auditor, Audit Committee and others appropriate.
6.        Obligation of Employees for Cooperation
All the employees have obligation to cooperate with the investigation of fraud behaviors, and provide in-time, complete and exact information.
7.        Rule of Periodic Report
The General Auditor of the Internal Audit Department in the company should summarize the matters reported periodically (at least once semiannually), make a form or a written report, and the summary should contain the survey of employees’ report, description of the fraud behaviors, disposal methods, results and the estimated finishing date and so on, and the form or report should be reported to the Audit Committee.
All the branches and persons who work for the Audit Committee and investigate the fraud behaviors should report to the Audit Committee according to the above-mentioned format and content.
8.        Forbid Revenge and Settlement for Complaint by Revenge Way
Any employee who base on the faithfulness and dutifulness principles reports the fraud behaviors and his action is protected by the company. Any revenge to the aforementioned act is forbidden. Meanwhile, it is forbidden to revenge the person who participate in the investigation of fraud behaviors. The management must assure that the employees they governed adhere to the forbidding rule strictly. The management of the company who fail to fulfil the duty described in the above-mentioned anti-revenge rule will face disciplinary action, even will be released from duty or dismissed.
If any employee deems that he or she suffered revenge, threat and discrimination and so on, he or she has the right to appeal to the senior management or the Audit Committee directly or bypass the immediate superior according to the measure.
Legal Department of the company is responsible for investigating the complainant who suffered revenge, and the Human Department is in charge of cooperating with the Legal Department.
If complainant assures that he or she suffered revenge because of disclosing the fraud behaviors, he or she has the right to submit a complaint to the U.S. Department of Labor directly.
9.        Rights Reserved
The company reserves the right to make changes or supplements for any reason at any time. Any rules described in the measure will not form a agreement between the company and the employees and will not change employment rules between the company and the employees.
 
 
                                                                                   
China Recycling Energy Corporation
July 27, 2009
 

 

Copyright 2008 China Recycling Energy Corporation. All rights reserved.