Quick settlement could leave many investors without compensation, damage
trust in securities safety net in Canada
TORONTO, Dec. 7, 2012 /CNW/ - Leading Canadian investment firms will
oppose a proposed "framework" that would circumvent normal class-action
investor protections, the firms announced today. Auditors and
underwriters for failed Sino-Forest Corporation are in court in Toronto
today to seek approvals for settlements that would leave many investors
without well-established legal recourse.
Parties to the insolvency proceeding, including Sino-Forest itself,
former Sino-Forest auditors Ernst & Young and BDO, and 11 firms that
were underwriters for Sino-Forest securities, as well as lawyers for
plaintiffs in the class action arising from the crash in Sino-Forest
stock, want the insolvency court to approve a Plan, which includes
liability releases that would prevent investors from pursuing claims
individually against the underwriters and auditors ("the Plan"). The
objecting investors contend that those releases would, in effect,
deprive them of well-established rights to "opt out" of class actions
if they do not want to be bound by settlements negotiated by class
Comité Syndical National de Retraite Bâtirente Inc. ("Bâtirente"), Northwest & Ethical Investments L.P. ("NEI") and Trimark
Investments, part of Invesco Canada Ltd. are concerned that sanctioning
the Plan will damage investors' trust in the integrity of Canada's
capital markets, particularly in light of the most recent allegations
leveled by the OSC against Ernst & Young.
"The approval of a settlement with a third party to a CCAA application
is extraordinary," says John Mountain, SVP Legal, NEI Investments. "The
parties are proposing to extinguish the legal rights of thousands of
investors across Canada without allowing them the opportunity to review
the settlement or to retain counsel and pursue their own actions. We
believe it is important to step up to protect the legal rights of those
investors who are being deprived a voice at this crucial stage."
A class action commenced in Ontario against Sino-Forest, its directors
and officers, the underwriters, the auditors and other defendants on
behalf of investors harmed by the alleged fraud involving Sino-Forest.
The class action alleges that the defendants fundamentally
misrepresented the integrity of Sino-Forest's business operations and
financial reporting, and materially overstated its assets and financial
results. The class action has not been certified and counsel to the
plaintiffs in the class action do not represent Bâtirente, NEI, Trimark
Investments, who have retained their own counsel.
On March 30, 2012, Sino-Forest sought protection from its creditors
under Companies' Creditors Arrangement Act ("CCAA"). On Friday, December 7, Sino-Forest will ask the court to approve a
plan to restructure its operations. The most recent version of that
plan was only made publically available on Monday, December 3, the same
day that the OSC announced allegations that Ernst & Young had failed in
its role as Sino-Forest's auditor, and a potential settlement between
Ernst & Young and the plaintiffs in the class action was announced. The
most recent version of the Plan includes a mechanism that would forever
release Ernst & Young from claims in relation to its work as
Sino-Forest's auditor and would deprive other investors of their legal
right to pursue separate actions against Ernst & Young. The terms of
the settlement with Ernst & Young have not been publicly disclosed,
although the settlement is purportedly valued at $117 million.
The Sanction Hearing to approve the Plan is scheduled to take place
before Justice Morawetz on December 7 and 10, 2012 at 10:00 am.
Bâtirente, NEI, and Trimark Investments are represented by Kim Orr
Barristers P.C. of Toronto in these proceedings.
COMITÉ SYNDICAL NATIONAL DE RETRAITE BÂTIRENTE INC. ("Bâtirente")
NORTHWEST & ETHICAL INVESTMENTS L.P. ("NEI")
TRIMARK INVESTMENTS, part of INVESCO CANADA LTD. ("Trimark
SOURCE: NEI Investments
For further information:
Maverick Public Relations
416-640-5525 x 253
514-525-5740 x 2425