In what is by far the largest settlement in the current wave of securities litigation involving Chinese companies, Ernst &Young, which served as the outside auditor for Sino-Forest, has agreed to pay C$117 million to settle the securities suit that Sino-Forest investors filed in Ontario against the accounting firm. (At current exchange rates, the Canadian dollar and the U.S. dollar are valued roughly equally.) According to the plaintiffs' lawyers' December 3, 2012 press release (here), E&Y's settlement of the Sino-Forest suit "is the largest settlement by an auditor in Canadian history, by a large margin, and is one of the largest-ever auditor settlements worldwide."
As discussed here, the plaintiffs' lawyers first filed their suit in Ontario Superior Court of Justice on behalf of Sino-Forest shareholders in June 2011, following press reports and online reports that the company had substantially overstated the size and value of its forestry holdings in China's Yunnan province. The allegations first emerged in a June 2, 2011 report by online-research firm Muddy Waters, which accused Sino-Forest of outright fraud. Floyd Norris's June 9, 2011 New York Times article about E&Y's involvement in the Sino-Forest scandal can be found here. Earlier this year, Sino-Forest filed for bankruptcy protection.
As detailed in the claimants' amended statement of claim, the lawsuit named as defendants Sino-Forest, its senior officers and directors, its auditors, its underwriters and a consulting company. The plaintiffs previously settled with the consulting company in an agreement that did not involve any monetary payments (refer here). An overview of the Ontario litigation, including links to key documents, can be found here. The plaintiffs' lawyers' December 3 press release emphasizes that the plaintiffs' claims against the remaining defendants (including in particular the individual directors and officers and the offering underwriters, as well as another auditor) remain pending.
Click here to read the entire post .
Read other items of interest from the world of directors & officers liability, with occasional commentary, at the D&O Diary, a blog by Kevin LaCroix.
For more information about LexisNexis products and solutions connect with us through our corporate site.