Two pension funds are part of a $7.37-billion lawsuit against Sino-Forest Corp., accusing the Chinese timber operator of misrepresenting financial statements, artificially inflating share prices and overstating its forestry holdings.
Law firms Koskie Minsky LLP and Siskinds LLP filed the claim in Ontario Superior Court of Justice on behalf of the Labourers’ Pension Fund of Central and Eastern Canada and the International Union of Operating Engineers Local 793 pension plan, according to The Canadian Press. The statement of claim indicates that both pension plans bought shares in Sino-Forest from March 19, 2007 to June 2, 2011, the period covered by the lawsuit, during which time the company raised more than $2.7 billion in the capital markets.
None of the allegations in the statement of claim have yet been proven in Court. The claim names several Sino-Forest executives and also names auditor Ernst & Young and financial institutions that had acted as underwriters for the company’s 2009 prospectus offering, including TD Securities, Dundee Securities, RBC Securities, Scotia Capital and CIBC World Markets.
“The underwriters earned fees from the class, whether directly or indirectly, for work that they never performed or that they performed with gross negligence, in connection with the offerings, or some of them,” according to the claim.
The Ontario Securities Commission halted trading of Sino-Forest shares on the Toronto Stock Exchange (TSX) last week, after accusing the company of fraud. While most of its operations are in China, Sino-Forest at one point led all forestry companies listed on the TSX. But the company’s share price dropped earlier this summer after the release of a negative report by Muddy Waters Research, which contained allegations that the company exaggerated sales and assets.