Two Canadian law firms representing a pension fund have filed a $6.5-billion class action in the Ontario Superior Court of Justice against Sino-Forest Corp., a Hong Kong-based forestry company traded on the Toronto Stock Exchange. Sino’s senior officers and directors are also named in the proposed class action.
Koskie Minsky LLP and Siskinds LLP said yesterday the proposed class action was filed on behalf of the Labourers’ Pension Fund of Central and Eastern Canada, which is seeking to be the representative plaintiff on behalf of all persons and entities that purchased Sino-Forest securities from May 14, 2007 to June 2, 2011.
Sino-Forest has had a pretty rough ride since June 2, losing about 90 per cent of its value on the Toronto Stock Exchange following allegations about the company’s governance and business model. The stock’s fall started following the release of a report by Muddy Waters Research, which accused the company of fraud and exaggerating the size of its forestry assets.
The lawsuit alleges that during that period the company “materially misstated Sino’s assets and results of operations, and thereby misrepresented that Sino’s financial statements had been compiled in accordance with generally accepted accounting principles.”
In a statement following the filing, Dimitri Lascaris, a partner at Siskinds who co-represents the pension fund, said the case “raises some hard and troubling questions about the quality of diligence being performed by some well-compensated fiduciaries upon whom Sino’s shareholders relied, and we look forward to establishing in a court of law whether those fiduciaries fell woefully short of the standards that the investing public rightly demands of them.”
Today, Sino-Forest lost half of its already-decimated value, plunging to an eight-year low after billionaire hedge fund manager John Paulson dumped his entire stake in the company. Paulson had been Sino-Forest’s largest shareholder, with a 14.1-per-cent stake.
It was the latest in a series of set backs. Credit rating agency Fitch also cut its debt rating on the firm to junk status and Canadian brokerage RBC Capital Markets suspended its coverage, pending the outcome of an internal company review.
An in-depth
report in
The Globe and Mail Saturday reinforced some of the Muddy Water charges, raising more questions about a Sino-Forest business model that the company says centres on buying and selling trees in China.
Sino-Forest said Monday the
Globe report was an “incorrect portrayal” of its business. It has set up an internal committee to look into the charges and report back, probably within three months.
Sino-Forest has shed nearly $4.5 billion in market capitalization since the June 2 Muddy Waters report.
With files from Reuters.
