The judge overseeing the restructuring of scandal-plagued Sino-Forest Corp. says he will issue a ruling on Monday in a legal skirmish launched over a proposed $117-million settlement reached between class-action lawyers representing burned investors in the company and its former auditors, Ernst & Young LLP.
Mr. Justice Geoffrey Morawetz of the Ontario Superior Court heard arguments on Friday from lawyers acting for a group of large institutional shareholders of Sino-Forest who argue that the proposed settlement deal with the auditors unfairly blocks them from suing Ernst & Young on their own.
The settlement is part of the broader restructuring deal that would see Sino-Forest transfer its remaining assets to its debt holders, who approved the plan in a vote on Monday. The company’s stock sank after it was hit by fraud allegations last year, losing investors billions.
Lawyers for investment funds Invesco Canada Ltd., Northwest & Ethical Investments LP and Comité Syndical National de Retraite Bâtirente Inc. told court Friday that the proposed deal with Ernst & Young would unfairly preclude their right to opt out of the $9.18-billion class action against Sino-Forest, its directors, auditors and underwriters and launch their own lawsuit. They demanded a month-long adjournment, or the scrapping of the plan all together.
But lawyers for Sino-Forest and its court-appointed monitor told court objections to the settlement were “ill-informed” and that the overall restructuring deal must be approved before what’s left of Sino-Forest runs out of cash. Nothing in the restructuring plan, they told the judge, finalizes the Ernst & Young settlement, which would be subject to other court approvals.
Sino-Forest lawyer Robert Staley dismissed objections to the plan, saying they came from the holders of just 1.5 per cent of Sino-Forest shares and were more about bickering between rival class-action firms. The dissenting investment funds lead lawyer is Won Kim of Kim Orr Barristers, who launched an initial class-action case against Sino-Forest but lost the case in a carriage fight to rival law firms.
Mr. Kim told court that the case was about his client’s “fundamental rights” and that allowing Ernst & Young to evade other potential lawsuits could affect “the perceived integrity of our securities markets.”
The Ontario Securities Commission said this week that it had launched proceedings against Ernst & Young for allegedly failing to properly scrutinize Sino-Forest’s books.Report Typo/Error