Silvercorp Metals Inc. feels vindicated now that an independent audit team has released favourable findings, but the company's legal work won't end any time soon.
Silvercorp is still working with regulators on both sides of the borders, and it has also filed a lawsuit against shortsellers who levelled allegations of impropriety.
For this case, and for its dealings with the SEC, Silvercorp has a bigwig behind it. The company has hired Stephen Crimmins, a partner at K&L Gates, who is the former deputy chief litigation counsel of the Securities and Exchange Commission and who now represents clients in enforcement investigations and litigation conducted by the SEC.
The hire has instilled confidence in some investors, who argue that Mr. Cummins wouldn’t take on a case he didn’t fully believe in. Whether that's a valid argument or not, at the very least the hire proves yet again that Silvercorp is pushing back against the short-sellers as hard as it can.
On Monday, KPMG forensic auditors released a report that found that Silvercorp's cash and short-term investment balances match what the company originally reported and that other areas of its financial statements hold up.
The report isn't as far reaching as it could be, because KPMG “did not undertake a comprehensive review of revenue and its source,” Silvercorp stated. Nor did it "undertake a funds tracing or analysis of sources and uses of cash, or work to assess related parties," but Silvercorp chief executive officer Rui Feng says it offers enough breathing space to turn his attention to the short sellers.
Silvercorp is seeking legal resourse against five parties that have targeted the firm. Mr. Crimmins, the former SEC lawyer, is leading a defamation case against them, in which Silvercorp is seeking damages exceeding $1-million (U.S.) and punitive damages of at least $10-million to deter the short-sellers from doing something similar again.