"The Chinese love important people and General Clark was certainly able to draw them to the conferences," said Drew Bernstein, the managing member of Marcum Bernstein & Pinchuk, one of the largest accounting firms servicing China-based companies trading in the U.S. "Almost everybody that spoke was connected somewhere to government and military. Rodman did this because it leant an air of credibility to everything they were doing."
Roddy Boyd, a financial investigator who founded the Southern Investigative Reporting Foundation, attended several of the conferences. Boyd said there is no way to know how much Clark knew about the firm's efforts to scrutinize Chinese companies, or whether his only role with Rodman & Renshaw was as a figure head. There were certainly executives at the firm, Boyd said, who had far more direct involvement in vetting Chinese companies before they were pitched to investors. Boyd said he believes Clark's presence on the firm's board was intended to shape Rodman's public image.
"He was a smiling authoritative, commanding face, very reassuring to an American investor," Boyd said.
But many of the Chinese companies being promoted at the Rodman & Renshaw conferences turned out to be suspect. An analysis by ABC News found that 20 of the 40 Chinese companies that presented at the 2010 conference have since lost their listing on U.S. exchanges, and another 10 are trading at below $1 per share. One of the companies that presented at a 2008 Rodman conference at the New York Palace Hotel was Puda Coal. The rural Chinese company purported to own one of the country's largest coal mining operations.
The company traded on the New York Stock Exchange from 2009 to August 2011, when trading halted on word that Puda's chairman had secretly transferred control of the company's sole source of revenue to himself and turned Puda into an empty shell company before selling shares to the public. Shares of Puda stock dropped from a high of $17 to pennies and cost investors hundreds of millions of dollars, according to an SEC civil fraud complaint filed last year.
In the case of one small investor interviewed by ABC News, truck stop manager Al Smith of Boise Idaho, $60,000 of his retirement evaporated overnight.
"There's no recourse," Smith said. "It's very frustrating."
As more and more Chinese companies began to be exposed – mostly by so-called short sellers who had placed bets on the companies failing – Rodman & Renshaw's business model began to falter. The firm announced last year it was abandoning the China market and soon after it was subsumed by its parent company, Direct Markets Holdings Corp. Calls to Direct Markets were not returned. A lawyer representing Rodman & Renshaw in an investor lawsuit also declined to comment.
Bernstein said it would be tough to look at how so many Chinese companies falter and not question the way Rodman & Renshaw championed those companies to investors.
"With respect to the China market, it's tough to say anything but that they handled themselves poorly," he said. "If you got all the investment bankers in a room and you ask them why did all this happen, the one thing they would admit is that they could have done better or more due diligence on these companies."
Schapiro agreed, saying that investors "rely on the brokers to do their due diligence and to ensure that they're only recommending stocks to investors that are appropriate."