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ShengdaTech Complaint Against Auditors

ShengdaTech Complaint Against Auditors

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Published by Chapter 11 Dockets
ShengdaTech Complaint Against Auditors
ShengdaTech Complaint Against Auditors

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Categories:Types, Business/Law
Published by: Chapter 11 Dockets on Aug 25, 2013
Copyright:Attribution Non-commercial

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10/22/2013

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6
4
13
1
JOHNF.MURTHA,ESQ.
NevadaBarNo.835
2
WOODBURNANDWEDGEWoodburnandWedge
3
6100Neil
Road",
Suite500Reno,Nevada
1\9511
Phone:(775)688-30165Fax:(775)688-3088Email:Jmurtha@woodbumandwedge.comLocalCounselForPlaintiff
7
STUART
M.
GRANTESQ.
8
DelawareBarNo.2526
MEGAN
D.
McINTYRE,ESQ.
9
DelawareBarNo.3307
CHRISTINEM.MACKINTOSH,ESQ.
10
DelawareBarNo.5085
GRANT
&
EISENHOFERP.A.
11
Grant
&
EisenhoferP.A.
123
JustisonStreet
12
Wilmington,DE19801(ProHacViceApplicationstobeFiled)Telephone:(302)622-7000
14
Facsmrile:(302)622-7100Email:mmcintyre@gelaw.com
15
16
17
CounselforPlaintiffUNITEDSTATESBANKRUPTCYCOURTDISTRICTOFNEVADA
1819
INRE:
20
SHENGDATECH,INC.,
21
Debtor.
22
23
SHENGDATECHLIQUIDATINGTRUST,
24
Plaintiff,
25
v.
26
HANSEN,BARNETT
&
MAXWELL,
P.~
BAKERTILLYINTERNATIONAL
27
LIITED;KPMGINTERNATIONALCOOPERATIVE;andKPMGLLP,
28
Defendants.
1
CaseNo.BK-11-52649-BTBChapter
11
-AdversaryNo._COMPLAINTJURYTRIALDEMANDEDHearingDate(Adv.Sched.Conf.):HearingTime:Estimatedtimeforhearing:
Case 11-52649-btb Doc 781 Entered 08/15/13 16:36:28 Page 1 of 49
 
1
PlaintiffShengdaTechLiquidatingTrust(the"LiquidatingTrust"or
2
"Plaintiff'),byitsundersignedattorneys,allegesthefollowinguponpersonal3lmowledge
as
to
itself,anduponinformationandbelief
as
to
allothermatters.
4
Many
of
thefactssupportingtheallegationscontainedhereinarelmownonly
to
5
Defendantsorareexclusivelywithintheircustodyand/orcontrol.Plaintiff
6
believesthatfurthersubstantialevidentiarysupportwillexistfortheallegationsin
7
thisComplaintafterareasonableopportunityfordiscovery.
8
I.
JURISDICTIONAND
VENUE
9
1.
ThisCourthassubjectmatterjurisdictionoverthisadversary
10
proceedingpursuant
to
28
U.S.C.
§
1334(b)becauseit
is
relatedtoacaseunder
11
title
11,
namely,
InreShengdaTech,Inc.,
CaseNo.BK-11-52649-BTB(Banla.
D.
12
Nev.)(the"BanlauptcyProceeding").
13
2.
Additionally,onOctober
2,
2012,thisCourtenteredanorderinthe
14
BanlauptcyProceedingconfirmingtheFirstAmendedChapter
11
Plan
of
15
Reorganization,
As
Modified(the"Plan
of
Reorganization")
of
ShengdaTech,Inc.
16
("ShengdaTech").ThePlan
of
ReorganizationexpresslyprovidesthatthisCourt
17
retainsexclusivejurisdictionoverallmattersarisingoutof,andrelatedto,the
18
BanlauptcyProceedingtothefullestextentpermittedbylaw,including
19
jurisdiction
to
"hearanddetermineanyandalladversaryproceedings,motions,
20
applications,andcontestedorlitigatedmatters."
21
3.
VenueisappropriateinthisDistrictpursuant
to
28
U.S.C.
§
l409(a)
22
becausethisactionisrelated
to
theBanlauptcyProceedingpendinginthisCourt.
23
4.
VenueisalsoappropriateinthisDistrictpursuant
to
28
U.S.C.
§§
24
139l(b)(1)and/or139l(b)(3)becauseeach
of
theDefendantsissubject
to
25
personaljurisdictioninthisDistrictandisdeemedtoresideinthisDistrict.By
26
agreeing
to
serve
as
anauditor
of
ShengdaTech,aNevadacorporation,defendant
27
Hansen,Barnett
&
Maxwell,P.C.("Hansen")haspurposefullyestablished
28
sufficientcontactswithNevada
to
conferpersonaljurisdictionoveritwithrespect
2
Case 11-52649-btb Doc 781 Entered 08/15/13 16:36:28 Page 2 of 49
 
1
to
claimsarisingfromitsservice
as
such.Hansenhasfurthersubjecteditself
to
2
thejurisdiction
of
thisCourtbyacting
as
anordinarycourseprofessional
to
the
3
debtorsandasserting
an
informalproof
of
claimintheBankruptcyProceedingin
4
itsdeclarationsupportingitsretention
as
anordinarycourseprofessional[Docket5No.
208].
DefendantsBakerTillyInternationalLimited,KPMGInternational6Cooperative,andKPMGLLPconductbusiness,eitherdirectlyorthroughtheir
7
memberfirms,inthisDistrictandhaveearnedsubstantialrevenue
as
aresult
of
8
suchbusiness.Plaintiffsclaimsariseout
of
actionstakenbytheDefendants,
9
eitherdirectlyorthroughtheirmemberfirms,inconnectionwithservicesthese
10
memberfirms,includingKPMGLLP,providedtoShengdaTech,aNevada
11
corporation,andforwhichtheyearnedsubstantialrevenue.
12
5.
Thisadversaryproceedingcontainsbothcoreandnon-coreclaims.
13
Plaintiffconsents
to
entry
of
afinalorderbythebankruptcyjudge.
14
II.NATUREOFTHE
CASE
15
6.
ShengdaTech,acompanyincorporatedinNevadathatconductedits
16
operationsinthePeople'sRepublic
of
China,hasspiraledintobankruptcy
17
followingtherevelation
of
seriousdiscrepanciesinitsfinancialrecords.Those
18
discrepanciesare,inlargepart,theresult
of
afewmembers
of
ShengdaTech
19
managementmanipulatingthebooks
to
concealtheirlooting
of
theCompanyfor
20
theirownpersonalpecuniarygain.ShengdaTech'sLiquidatingTrust,
as
the
21
successor
to
thenow-defunctShengdaTech'slegalclaims,isnowintheprocess
of
22
marshalingwhatfewassetsremainfordistributiontotheCompany'screditors.
23
Throughthisaction,theLiquidatingTrustseekstorecoverfromthewell
24
compensatedauditing
firms
who,throughnegligenceandinbreach
of
their
25
contractswithShengdaTech,failed
to
uncoverthislootingandputastoptoit.
26
7.
Thenon-managementdirectorsonShengdaTech'sBoard
of
Directors
27
(the"Board")-whoconstitutedamajority
of
thefive-memberBoard-hadno
28
knowledge
of
management'swrongdoing,andreliedonDefendants
to
ferretout
3
Case 11-52649-btb Doc 781 Entered 08/15/13 16:36:28 Page 3 of 49

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