Datang Telecom Technology says it is being sued by two investors in China for misleading statements made in its financial report released in 2004.

The report says Datang has received a notice from the First Intermediate People's Court of Beijing and the notice says the court has accepted the case of Wei Zhaoying and Xu Zhengmao suing Datang for the company's "fake statements" provided in its financial report. Datang has made no further official comment other than to state it will report the lawsuit's effect on the company as the case proceeds.

Local media reports that Datang added fake profits to its annual financial report in 2004. According to the report at that time, the total profits of the company in 2004 were about CNY62.386 million. However, of the total profits, about CNY37.187 million were added by Datang through cost capitalization, less mention of preparation for assets impairment and inappropriate confirmation of investment profits.

In addition, the China Securities Regulatory Commission says that Datang's annual financial report for 2004 had a major omission, which was that the company did not provide reliable proof for the net realizable value of its storage in the annotations of its financial accounting statement.