The former chief financial officer of Sino-Forest Corp., who was fired in September following allegations levelled against him by the Ontario Securities Commission, is seeking more than $480,000 in severance and vacation pay from the Chinese timber firm, court documents show.
Lawyers for David Horsley, who served as Sino-Forest’s senior vice-president and CFO from October, 2005, until April, 2012, when the company received enforcement notices from the OSC, claim their client is entitled to $350,000 in severance plus an undisclosed annual bonus payment, as well as $135,800 in accrued vacation pay.
The proof of claim, filed in Ontario Superior court as part of the company’s restructuring under the Companies’ Creditors Arrangement Act, cites Mr. Horsley’s employment agreement with TSX-listed Sino-Forest undertaken in 2005. It also cites a “guarantee agreement” Mr. Horsley signed with a Sino-Forest subsidiary named Sino-Wood Partners Ltd., in March, 2012.
The court documents claim that under the “guarantee agreement,” in exchange for Mr. Horsley’s continued employment at Sino-Forest, Sino-Wood agreed to guarantee the “employment obligations” owed to Mr. Horsley by Sino-Forest under the original employment contract.
While Mr. Horsley stepped down as CFO in April, he remained with the company until Sept. 27, 2012, when the claim says Sino-Forest sent him a letter saying he was being terminated for cause. Mr. Horsley’s claim says he was “wrongfully dismissed” and is entitled to the severance and other compensation.
Mr. Horsley’s lawyer, Peter Wardell declined to comment.
Once the highest ranking Canadian at the company, Mr. Horsley is accused by the OSC of violating securities laws, but unlike other former executives – including former chairman and chief executive officer Allen Chan – he has not been accused of engaging in fraudulent activity.
Once Canada's largest publicly traded forest firm, with a market value in excess of $6-billion, Sino-Forest's shares collapsed in 2011 amid fraud allegations made by a short seller. The stock has been delisted from the Toronto Stock Exchange and the company is now insolvent.
In July, Sino-Forest conceded that it is owed more than $500-million from business partners in China that it said no longer exist. This week, the OSC levelled allegations against Sino-Forest’s auditor, Ernst & Young Canada, alleging the firm failed to fulfill its obligations. Separately, Ernst & Young Canada agreed to a record $117-million settlement as part of a proposed $9-billion class action lawsuit. The settlement, if approved by various courts, would represent the largest payment ever made as part of an Ontario securities class action case.