1. Time‐Lapse Video Shows China Integrated Energy Defrauded Investors
March 28, 2011
China Integrated Energy, Inc. (NASDAQ: CBEH) is a complete hoax, according to a detailed
investigation by the International Financial Research & Analysis Group (“IFRA”)
commissioned by one of its hedge fund clients. The report, key excerpts of which I am
publishing today, shows conclusively that:
1. Four months nearly continuous on site observation and video surveillance of CBEH’s
biodiesel operations in Xi’an (Tongchuan) confirm no meaningful production
activity, completely demolishing management’s repeated claims the plant is running
at 100% of capacity and generated $22,876,791 gross profit in 2010. On March 10,
2011, investigators caught and filmed CBEH management “red­handed”
staging phony production activity at the factory with the criminal intent to
defraud a group of 20 investors touring at the expense of CBEH’s investment
bank, Rodman & Renshaw (NASDAQ: RODM).
2. Three months of on‐site and video surveillance of CBEH’s recently acquired
Chongqing Tianrun biodiesel plant confirm no meaningful production activity,
either; completely contrary to management’s claims the plant is running at 100% of
capacity since January.
3. The largest PRC auditor performed an independent audit of CBEH’s 2009 financial
statements showing no revenue from biodiesel sales while gross profit from its
wholesale and retail diesel division was 46% lower than reported in its 2009 10‐K
filing.
4. The 100,000‐ton Tongchuan biodiesel production line never even bothered to
obtain a production license, which is absolutely required before it can sell any
biodiesel. Nor does the Tongchuan 100,000‐ton plant have any meaningful access to
feedstock (waste or vegetable oils) or advanced technology as management claims.
5. Despite no meaningful production of biodiesel in its history and with little more
than scrap value attributable to its idle plants, CBEH management falsely claims in
its SEC filings that it invested $46.1 million acquiring and building out these totally
unproductive assets over the last 5 years. Additionally, CBEH has announced it will
spend another $46 million acquiring and building out its new Hainan plant in 2011.
6. In addition to greatly exaggerating the earnings of its wholesale and retail divisions,
CBEH management falsely claims in its SEC filings it spent $53.2 million acquiring
and leasing these assets over the last three years. It projects to spend another $8.2
million on Chongqing FengDou Keyu acquisition in 2011.

2. 7. CBEH’s ongoing and continuous hoax allowed it to raise $85 million from investors
to date, including $39.5 million most recently with the help of its investment banker
Rodman & Renshaw (NASDAQ: RODM). The ongoing fraudulent acquisitions and
capital expenditures combined with a legally unenforceable VIE structure in China
will result in a total loss for U.S. investors.
First, some background information. Some of my readers may recall that last September I
published IFRA’s detailed report (here) on China Green Agriculture (NYSE: CGA). Then in
November IFRA investigators contributed key customer reference evidence to the Muddy
Waters LLC report on Rino International (Pink Sheets: RINO) leading to its chairman’s
admission of fraud and subsequent collapse and delisting of its stock. IFRA also uncovered
key tax evidence on RINO that I published (here). Needless to say, the team at IFRA (link to
their site here) does excellent work rooting out fraud for their clients who are institutional
investors or hedge funds both long and short.
IFRA’s massive report on CBEH was prepared for one of its hedge fund clients, no doubt at
considerable cost, after the fund became suspicious of CBEH’s incredible earnings
performance compared to its competitors. I am fortunate that IFRA and the hedge fund
gave me permission to publish key excerpts from the report in an effort to expose the truth
and of course make some money since both the fund and myself are short CBEH. I had
hoped to publish this report sooner but the effort is ongoing. The considerable video
evidence (over a terabyte) took me a long time to personally review. The key findings of
the report follow.
1. Four months nearly continuous on site observation and video surveillance of CBEH’s
biodiesel operations in Xi’an (Tongchuan) confirm no meaningful production activity,
completely demolishing management’s repeated claims the plant is running at 100% of
capacity and generated $22,876,791 gross profit in 2010.
The following is an explanatory overview image of the Tongchuan plant, shown from
the perspective of the investigators’ surveillance camera, which focused on the single‐
entry/exit point identified below:

3.
According to management, the Tongchuan plant’s 100,000‐ton production line
produced 88,500 tons of biodiesel in 2010 (source Q3 10‐Q and Q4 conference call also
here). By subtracting the 11 legal holidays and assuming the plant is open for business
the remaining 354 days of the year, I calculate an average daily production volume of
250 tons per day. Assuming the raw material feedstock is approximately the same
weight as the finished biodiesel, the Tongchuan plant likewise should consume at least
250 tons of feedstock per day. CBEH’s biodiesel and liquid feedstock are transported on
20‐30 ton tanker trucks according to management. Assuming 30‐ton tanker trucks are
used to transport 500 tons of biodiesel and liquid feedstock per day, one would expect
to witness, on average, about 500/30 =17 tanker trucks entering and then exiting the
plant each day. The Tongchuan plant has a single‐entry/exit point for tankers. Filming
17 tanker trucks entering and exiting this gate would result in 34 instances of a tanker
truck passing through the gate, each day, on average. Incredibly, during four months
of almost continuous surveillance, the investigators witnessed only six (6!!)
tanker trucks, ALL but one appearing on the spectacular day: the March 10, 2011
Rodman & Renshaw investor tour of the Tongchuan facility.
But before I share the investor tour video, you need to review the videos of the
completely idle Tongchuan plant as recorded by the surveillance team each and every
day. I reformatted and uploaded 10 days of time‐lapse surveillance of the Tongchuan
plant to Vimeo where anyone can view them (Click here for the Vimeo CBEH Channel).
The videos are from February 10th to 19th. I selected these dates since on the fourth
quarter earnings conference call held on March 10th, management replied to several
questions from an investor (transcript available here or here see page 12), explaining
that following normal annual maintenance the Tongchuan plant “is already back to full
production on February 9, right after the Chinese New Year.” (Note: Institutional
investors and research analysts can contact me for the complete catalogue of
surveillance records available from IFRA.)

4.
IFRA investigators first observed the Tongchuan plant in June of 2010 and then again in
October before commencing surveillance on November 26, 2010. Four months later,
they have yet to detect ANY meaningful evidence of production. The only apparent
activity is workers and engineers installing equipment and testing the new 50,000‐ton
production line. Combined with the plant’s lack of a production license, feedstock
access, technology or any record of biodiesel sales in CBEH’s Chinese audited financials
(see points 4 and 5 below), CBEH’s claims that it produced 88,500 tons of biodiesel
generating gross profit of $22,876,791 in 2010 are a complete fraud. The facts prove
CBEH has never produced and sold any meaningful quantity of biodiesel at all.
On March 10, 2011, investigators caught and filmed CBEH management “red­
handed” staging phony production activity at the factory with the criminal intent
to defraud a group of 20 investors touring at the expense of CBEH’s investment
bank, Rodman & Renshaw (NASDAQ: RODM).
In January 2011, CBEH received $39.47 million gross proceeds (see press releases here
and here) from registered direct offerings arranged by Rodman & Renshaw, who
earned a placement fee of 7% on the deals. On March 7th, CBEH made an investor
presentation at Rodman’s annual China investment conference in Shanghai (list of
presenting companies is here). Following the conference, Rodman & Renshaw arranged
for a group of approximately 20 investors to visit CBEH’s Tongchuan biodiesel facility
outside of Xi’an on March 10th at 9:45am.
Aware of this visit, IFRA investigators anticipated that CBEH management might
intentionally deceive the investors touring Tongchuan by staging phony production and
distribution of biodiesel. Such deception caught on film could prove CBEH
management’s criminal intent to defraud investors. Right up until March 9th,
investigators continued making daily recordings of the idle Tongchuan facility.
On March 9th investigators filmed CBEH employees busily cleaning and preparing the
factory for the next day’s investor tour. Early on the morning of March 10th, four large
biodiesel tanker trucks arrived and parked at the factory. It seemed CBEH management
had indeed planned a “show” for investors that day. Prior to this date, the surveillance
team had only witnessed one previous tanker truck enter the factory (on March 2nd).
Rather than filling up with biodiesel as would be expected in a real business operation,
the four tankers sat idle for 1 hour 20 minutes awaiting the arrival of the investors. At
9:45am the Rodman & Renshaw investors arrived precisely on schedule and were
greeted by CFO Albert Pu and VP‐IR Susan Zhou. The plant immediately came alive
with four 30‐ton tanker trucks pretending to fill up with biodiesel while loud humming
sounds came from the production line. A fifth tanker truck arrived during the tour. As
far as anyone in attendance could tell, the Tongchuan plant appeared to be busily
operating at 100% of capacity, just as management had repeatedly publicly stated.
After the one‐hour tour, CFO Albert Pu handed out gift bags and the investors departed.
Management then departed. The last tanker truck departed. Most of the employees
departed. The factory quickly went back to the same idle emptiness of the prior four

5. months. The March 10th Rodman & Renshaw investor tour was just an elaborate
and criminally conceived hoax as anyone can see on IFRA’s March 9­13
surveillance videos I combined and uploaded to Vimeo (click here for the Vimeo
CBEH Channel).
2. Three months of on‐site and video surveillance of CBEH’s recently acquired Chongqing
Tianrun biodiesel plant confirm no meaningful production activity, either; completely
contrary to management’s claims the plant is running at 100% of capacity since
January.
The following is a picture of the Chongqing Tianrun plant from CBEH’s website (link
here).
The 50,000‐ton Tianrun plant is half the capacity of the 100,000‐ton Tongchuan plant. I
therefore assume it should have about half the traffic, equal to at least 8 large 30‐ton
tanker trucks entering and exiting through the plants single tanker truck entrance
pictured above. Filming 8 tanker trucks entering and exiting this gate would result in
16 instances of a tanker truck passing through the gate, each day, on average.
However, during three months of continuous surveillance, the investigators
witnessed no tanker trucks. The only evidence of any possible production during the
ongoing surveillance has been the presence of the occasional truck carrying barrels that
could contain oil feedstock. The total amount is certainly less than 150 tons over the
entire three months. Even factoring out the Chinese New Year holiday, given

6. management’s claim that the plant is running at 100% capacity would indicate
production and sales of over 11,000 tons during the three months of surveillance. The
surveillance evidence therefore irrefutably shows there has been no meaningful
production. I reformatted and uploaded ten days of IFRA’s time­lapse
surveillance of the Tianrun plant to Vimeo where anyone can view it (Click here
for the Vimeo CBEH Channel). I hope you enjoy watching cars drive by as the paint
peels off this idle and aging facility.
3. The largest PRC auditor performed an independent audit of CBEH’s 2009
financial statements showing no revenue from biodiesel sales while gross profit
from its wholesale and retail diesel division was 46% lower than reported in its 2009
10‐K filing.
IFRA investigators obtained a copy of an independent audit of CBEH’s Xi’an Baorun
Industrial subsidiary, the operating entity that owns the Tongchuan biodiesel facility as
well as the wholesale and retail divisions. Each year, Xi’an Baorun hires a Chinese audit
firm to audit its financials in order to apply for bank loans. Baorun’s Chinese auditor for
2009 was Zhong Rui Yue Hua, which is the largest PRC auditing firm in China with more
than 3,000 employees and 2,000 clients, 40 of whom are large SOEs such as Legend
Holding (parent of Lenovo) and Baosteel Group as well as 90 publicly traded companies
within China such as and Sinopharma and State Grid. A list of representative clients is
available (here). Zhong Rui Yue Hua ranks fifth, right after the “Big Four” by the
Chinese Institute of Certified Public Accountants (here). A partial translation of the
2009 Chinese audited financial statements can be downloaded (here). A comparison of
the translated Chinese audited financial statements and CBEH’s 10‐K financials is
available (here). For reference, the complete 2009 plus 2007 and 2008 Chinese audited
financials (performed by different auditors) are available (Part I here and Part II here).
Not surprisingly, the Chinese audit shows the company was making much less money
than CBEH reported in its SEC filings. Since the purpose of these audited financials was
to qualify for bank loans, I believe CBEH management prepared the financials to show
as much assets and income as possible under PRC accounting standards. Most
importantly, while the audit report includes the Tongchuan biodiesel plant assets
on the balance sheet (see translation of footnote on page 14 here), there are no
biodiesel sales, as shown in the sales breakdown by product on page 16 and 17
(translated here) Combined with all the other evidence, it again appears that
CBEH has never sold any meaningful quantity of biodiesel.
CBEH’s other divisions (wholesale and retail gas distribution) report grossly
exaggerated earnings as evidenced by the Chinese Audit report.
The 2009 Chinese audit report shows blended gross margin for the wholesale and retail
oil business (non‐biodiesel) was only 4.79%, less than half the gross margin CBEH
reported in its 2009 10‐K. The wholesale and retail combined gross profit was also
around half the combined gross profit CBEH reported in its 2009 10‐K. The 2008

7. comparable gross margin and gross profit figures were even worse, as shown in the
table below:
Wholesale and Retail 2008 2008 2009 2009
Divisions Gross Profit Gross Margin Gross Profit Gross Margin
Chinese audit report $8,175,820 3.80% $13,633,215 4.79%
CBEH 10‐K $16,123,771 9.69% $25,640,557 10.97%
CBEH in its SEC filings repeatedly claims it is exempt from corporate income tax from
2004 to 2011 due to it use of waste oil, water and residues in the production of its
products allegedly being exempt from income tax. However, based on the footnotes of
CBEH’s Xi’an Baorun Industrial’s Chinese 2009 audited financials, Baorun’s income tax
rate is 25% (see translation on p15 here). For the year ending 12/31/2009, its Chinese
audited financials show income tax payable of RMB 14,336,425. Furthermore, IFRA
contacted local tax bureau officials who confirmed Baorun is not exempt from income
tax. CBEH’s phony income tax exemption is another huge boost to the false net income
they report in their SEC filings.
4. The 100,000‐ton Tongchuan biodiesel production line never even bothered to obtain a
production license, which is absolutely required before it can sell any biodiesel. Nor
does the Tongchuan 100,000‐ton plant have any meaningful access to feedstock (waste
or vegetable oils) or advanced technology as management claims.
No production license. CBEH does not have a National Development & Reform
Commission (NDRC) production license for its 100,000‐ton Tongchuan biodiesel
production line. In China, all biodiesel plants have to obtain a license from NDRC before
they can operate. In its 2010 10‐K filing, CBEH mentions several times that it has a
biodiesel “distribution” license but there is no mention of a production license. IFRA
investigators contacted Shaanxi provincial NDRC official Mr. Guo who confirmed that
NDRC never issued a production license to CBEH’s 100,000‐ton Tongchuan biodiesel
production line. IFRA also obtained a SAIC record confirming the Shaanxi NDRC
official’s statement. The record shows that CBEH tried to set up a Tongchuan
biodiesel subsidiary in 2007 but was unable to obtain the NDRC biodiesel
production license and was specifically forbidden to produce and sell any
biodiesel products. As a result, the proposed Tongchuan subsidiary was
dissolved in late 2009 (see SAIC record here). Luckily CBEH did receive an NDRC
biodiesel production license for its new 50,000‐ton production line at Tongchuan
(adjacent to the 100,000‐ton line) on August 25, 2010 (here). CBEH used the new
license to finally establish a legitimate subsidiary in Tongchuan but it is still not
allowed to produce biodiesel for its old 100,000­ton production line. This is
further evidence that CBEH’s biodiesel business is a complete hoax having no
meaningful sales to date.
No feedstock. CBEH claims in its 10‐K it uses non‐edible seed oil, waste cooking oil and
vegetable oil residue as its key feedstock for production of biodiesel. 1) Let’s take waste

8. cooking oil as an example. CBEH claims it purchased waste cooking oil from four Xi’an
EPA‐designated waste cooking oil processing companies (see page 10 of the 424B5
filing on 1/5/2011 here, with a government website list of the collection centers
available here). After calling all four collection centers, IFRA found that the whole
city of Xi’an generates less than 25 tons of waste cooking oil per day. All four
centers combined could only collect less than 15 tons per day. The balance of 10 tons is
processed by small‐unlicensed cooking oil recyclers and sold to unscrupulous
restaurants. Please check out the call summaries and contact info of the four processing
centers (here). In addition to the insufficient supply, three of the centers deny they
have sold any waste cooking oil to Baorun Tongchuan in the last two years. The centers
claimed they sell the majority of their oil to chemical companies to make soap. One
center (Xi’an Zhongrun Environment Protection Technology, Inc.) claimed it sold at
most 1 ton per month of oil to CBEH.
CBEH listed 5 local associations on page 9 of its 1/5/2011 424B5 (here), with which it
has raw material purchasing contracts to buy biodiesel feedstock. Out of 4 forestry
bureau associations, only the one, in Yongshou County, acknowledged the existence of a
purchasing contract with CBEH but admitted the county does not grow much Chinese
Prickly Ash. The staff also said he wasn’t sure the actual tonnage CBEH actually
purchased under its contract. Three other county‐level forestry bureau associations all
denied the existence of having any relationship with CBEH. Most importantly, none of
these three counties (Danfeng, Ningqiang, Liuba) said they actually plant any significant
amount of Chinese Prickly Ash, cornel or Chinese Pistachios. Lastly, investigators could
not confirm the existence of Tongchuan City Chinese Prickly Ash Association, even after
checking various sources including the municipal government of Tongchuan, Forestry
Bureau of Tongchuan and SAIC in Tongchuan. Nor does the Tongchuan association
have a local phone number. Interestingly enough, a Tongchuan government report
(here) shows the aggregate tonnage of Chinese Prickly Ash produced in Tongchuan in
2009 was only 563 tons. Thus the Tongchuan City Chinese Prickly Ash Association,
even if it does exist, produces too little oil to provide a meaningful supply to CBEH. In
summary, CBEH obviously lied about its suppliers and raw material purchasing
relationships. These findings again support fact that the 100,000­ton biodiesel
plant has never produced and sold any meaningful quantity of biodiesel.
No Technology. CBEH touted its “strong R&D relationship” with leading universities in
China for its biodiesel production technologies. IFRA contacted the 3 institutions listed
in its 10‐K as research partners: Xi’an Petroleum University (XPU), Beijing Qingda Kema
Technology Co Ltd (a company under Tsinghua University that does biodiesel research)
and Northwest Agriculture & Forestry University (NAFU) to obtain their opinion of
CBEH’s biodiesel technology. Investigators contacted several colleges/departments
under XPU and couldn’t find any department having a research program on biodiesel
production. Professor Zhou, one of the two researchers in charge of Qingda Kema,
could not recall an agreement with CBEH and made it clear they would have never
agreed to transfer any technical know‐how to a 3rd party as specified in CBEH’s 10‐K.
Shockingly, a NAFU professor from the biodiesel research program confirmed existence
of a cooperative agreement, but told us CBEH never lived up to its terms. According to

9. NAFU, CBEH never took any serious look at their technology nor used it to produce a
single ton of biodiesel. All CBEH cared about, according to the researcher, was having
their name listed as a sponsor in the official evaluation of the research results.
Although NAFU did develop a technology to produce biodiesel using Chinese Prickly
Ash as feedstock (patent #: ZL 200610105197.0), CBEH never applied the technique.
Furthermore, NAFU’s technology has never been used in any commercial scale
production. In the researcher’s own words, “CBEH was never really interested in
making biodiesel and merely wanted to use the name of NAFU and its technology
to raise money.”
5. Despite no meaningful production of biodiesel in its history and with little more than
scrap value attributable to its idle plants, CBEH management falsely claims in its SEC
filings that it invested $46.1 million acquiring and building out these totally
unproductive assets over the last 5 years. Additionally, CBEH has announced it will
spend another $46 million acquiring and building out its new Hainan plant in 2011.
Considering that all of the evidence indicates CBEH has never produced and sold any
meaningful quantity of biodiesel, I do not attribute any value to CBEH’s biodiesel assets
(other than scrap value). Yet, over the past five years CBEH continues to “invest”
massive amounts of money raised from U.S. shareholders in the expansion of its
biodiesel division. Just as CBEH’s reported profits from its biodiesel division are clearly
a fraud, its “investments” in this division are also a fraud. IFRA’s thorough review of all
the relevant SAIC filings of all the subsidiaries show undisclosed related party
transactions with the Chairman’s son as well as other serious inconsistencies with
CBEH’s SEC filings. This has been well documented elsewhere. I can only conclude that
CBEH management simply used the phony biodiesel business to attract U.S. investment
that it then looted from shareholders.
6. In addition to greatly exaggerating the earnings of its wholesale and retail divisions,
CBEH management falsely claims in its SEC filings it spent $53.2 million acquiring and
leasing these assets over the last three years. It projects to spend another $8.2 million
on Chongqing FengDou Keyu acquisition in 2011.

10.
Considering that the Chinese Audit Report shows CBEH’s wholesale and retail divisions
generate about half the gross profit it claims in its SEC filings. Additionally, CBEH failed
to report in its SEC filings that it pays 25% corporate income tax. CBEH continues to
“invest” massive amounts of money raised from U.S. shareholders in the expansion of its
wholesale and retail divisions. Just as CBEH’s reported profits of these divisions are
clearly a fraud, its “investments” in these divisions are also a fraud. IFRA’s thorough
review of all the relevant SAIC filings of all the wholesale and retail divisions also show
additional undisclosed related party transactions with the Chairman’s son as well as
other serious inconsistencies with CBEH’s SEC filings. This has been well documented
elsewhere. One can only conclude that CBEH management paid far less than reported
for the acquisitions and expansion of its wholesale and retail divisions, again proving
management looted shareholders.
7. CBEH’s ongoing and continuous hoax allowed it to raise $85 million from investors to
date, including $39.5 million most recently with the help of its investment banker
Rodman & Renshaw (NASDAQ: RODM). The ongoing fraudulent acquisitions and
capital expenditures combined with a legally unenforceable VIE structure in China will
result in a total loss for U.S. investors.
As I stated above I give zero valuation to CBEH’s biodiesel business since it is a
complete scam and does not generate any meaningful earnings. Theoretically, based
on the Chinese Audit Report, I estimate the 2010 gross profit from the wholesale and
retail divisions could be equal to one half of what CBEH disclosed in its 10K, or $20.15
million ($40.31m/2). After deducting general and administrative expenses and interest
expenses CBEH’s pre‐tax income could be around $11.41 million. Since Xi’an Baorun is
subject to 25% corporate income tax CBEH’s true net income for 2010 could be at most
be $8.56 million. Applying a distressed market valuation of 3x values the wholesale and
retail divisions at $25.7 million. According to CBEH’s shareholder letter dated 3/23/11
(here or here) the unrestricted cash balance at 12/31/10 was $30.3 million, after
management deducted working capital and prepayments from customers. I add to this
the total net proceeds of $36.73 million CBEH raised from Rodman & Renshaw
investors to get $67.03 million. I then subtract $ 46 million CBEH is spending on the
Hainan Lin Gao acquisition and $8.2 million it is spending to acquire Chongqing
FengDou resulting in only $12.83 million cash balance today. Combining the $25.7
million value of the existing enterprise plus $12.83 million cash I value the whole

11. company at $38.53 million. CBEH’s fully diluted share count is 45.65 million following
the recent offerings. I therefore theoretically value CBEH at $0.84 per share.
However, since the videos clearly show management criminally defrauded U.S.
investors, the stock is worthless in my view. Chairman Gao Xincheng, if convicted of
fraud, will be forced to resign from the management of CBEH and its subsidiaries. But
Gao will certainly refuse to step down from CBEH’s Xi’an Baorun operating company.
At that point the U.S. investors will find it impossible under Chinese law to enforce the
VIE contract between Xi’an Baorun (legal owner of all the assets) and the U.S. listed
company’s 100% owned Chinese subsidiary (Redsky). Furthermore as soon as
Chairman Gao feels the threat of legal action he is likely to misappropriate the
remaining shareholder funds. As a result CBEH shareholders will almost certainly
recover nothing.
Note: I am short CBEH
***
About the Author
Mr. Little has over 35 years investing experience having begun his career as an accountant
at Deloitte. He spent 10 years in China, from 1994 to 2004, representing various foreign
investors including Coke, P&G, and Budweiser as they established beachheads in the
world's fastest growing economy. Today he lives in New York and Shanghai and spends his
time researching Chinese and other high growth companies. Having built a very successful
track record investing the last decade, he now shares all his investing ideas in his financial
blog "Little Al's Big Emerging Market Picks". Mr. Little is also a leading contributor in the
China sector on Seeking Alpha.
Official Site: http://labemp.wordpress.com/
Alfred’s previous reports and articles can also be found on Seeking Alpha at:
http://seekingalpha.com/author/alfred‐little/articles
Email: littlealfred96@yahoo.com
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In China Alfred can also be reached at +86 15900855608