Playing A Game Of Chinese Checking

A lot of folks on Wall Street got burned by Chinese stock darling Sino-Forest Corporation's collapse and resignation of the the company's CEO amid allegations of securities fraud and commodity speculation: the Chinese timber company had managed to all but corner China's insatiable market for building materials...without actually having the hard numbers of hardwood.  Oops.  It was a nasty shell game, and the implosion last month was impressive.

Now the Department of Justice is looking into other Chinese companies on the NYSE and asking a lot of questions.

The U.S. Justice Department is investigating accounting irregularities at Chinese companies listed on U.S. stock exchanges, said an official with the Securities and Exchange Commission, suggesting criminal charges may be brought in addition to civil proceedings.

"There are parts of the Justice Department that are actively engaged in this area," Robert Khuzami, director of enforcement at the SEC, said in an interview on Tuesday.

He told Reuters that a number of federal prosecutors around the United States were taking part in the investigation, but he declined to name them.

Involvement of U.S. attorneys general in various locations adds investigative firepower to the SEC and the Federal Bureau of Investigation, which are also probing the accounting methods of certain U.S.-listed Chinese companies.

"I think that you will see greater (Department of Justice) involvement as time goes on," Khuzami said when asked if criminal charges would be filed in the investigation.

A former federal prosecutor, he declined to elaborate on which Chinese companies or auditors were being scrutinized by the Justice Department.

The question?  How many more Sino-Forest landmines are hiding in the NYSE right now?  Could be nasty if this investigation steps on one.  Stay tuned, there's major implications this one, including the notion that China itself is engaging in commodity speculation in order to make money off of everyone else in the market.

Hey, it worked for Wall Street.