Rino mess gets muddier

The mud is only getting deeper for Rino.

Rino International (RINO), the Nasdaq-traded Chinese maker of steelmaking emissions gear, said Thursday that investors shouldn't go relying on its public financial statements for the past two years and change.

A sinking feeling

The statement comes a week after shares in the company plunged following a report by a Hong Kong-based short-seller and research firm called, um, Muddy Waters, alleging that Rino's financial statements were essentially made up out of whole cloth.

Rino responded by saying it would look into the matter, and a filing with the Securities and Exchange Commission Thursday indicates the probe isn't going well, at least if you happen to own Rino shares.

The conclusion of the Board that the financial statements for the above-described periods should not be relied upon was based on statements made by the Registrant's Chief Executive Officer, Mr. Zou Dejun, after consultation with the Registrant's Chief Accountant, who reported to the Board that the Registrant did not enter into two contracts for which it reported revenue during the Registrant's 2008 and 2009 fiscal years.

Three of the Registrant's Board members, including the Chairman of its Audit Committee and Chief Executive Officer, discussed the foregoing matters with the Registrant's independent accountant on November 16 and 17, 2010.

The Registrant's Board has authorized its Audit Committee to take all steps necessary to investigate the matters set forth above and other allegations of misstatements, and address any deficiencies found, including authorization to engage an outside law firm to conduct an independent investigation with the assistance of such other professionals as it may require.

So that's where that stands. Rino shares were halted Thursday at $6.07, down 78% this year, and are likely to remain so for some time.