You may recall China Sunergy's (NASDAQ:CSUN) recent flameout involving a sales whiff and the resignation of a top executive. Now another solar supplier is getting slammed, and there's a whiff of scandal in this case as well.

A former employee of wafer whiz LDK Solar (NYSE:LDK) has accused the company of inventory-reporting shenanigans. The discrepancy that's been cited would equate to an overstatement of about 33%.

The company has taken a few actions in response. It made sure to note that this individual, hired as a financial controller, was fired after he didn't show up to work for about a week. This ought to help cast doubt on the claim by creating the image of some sort of jilted, slacker employee. More substantively, the company has conducted a physical inventory check, and contracted an independent party to do the same. The latter is obviously the most crucial to regaining credibility.

It's somewhat amazing to see how much damage has been done to LDK's stock price by a hint of management impropriety. This is an unfortunate part of investing in a business on the other side of the world. When uncertainty is in the air, that wafer factory starts to feel very, very far away -- if, indeed, there is a factory. (Cue ominous music.) That right there is the psychology of fear at work.

The selling seems a bit overdone here. That said, even after a 30% haircut, LDK doesn't look all that much cheaper than larger wafer producer MEMC Electronic Materials (NYSE:WFR). MEMC offers a similarly slim PEG ratio, a billion bucks on the balance sheet, and best of all, an absence of drama.

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