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Lawyers battle for case against Sino-Forest

JEFF GRAY — LAW REPORTER

From Wednesday's Globe and Mail Published Tuesday, Dec. 20, 2011 2:32PM EST Last updated Tuesday, Jan. 10, 2012 5:37PM EST Rival groups of the country’s most prominent class-action lawyers will be back in a Toronto courtroom Wednesday morning, fighting among themselves for the right to represent burned investors who lost billions of dollars in scandal-plagued Sino-Forest Corp. (TRE-T4.81----%) The battle to lead the class-action lawsuit against Sino-Forest and its big-name auditors and underwriters pits three rival teams of law firms against each other. They all filed their own separate lawsuits on behalf of investors in the wake of the fraud allegations that sank the forestry company’s stock this year. At stake, the helm of perhaps the largest and highest-profile shareholder class-action in Canadian history, and a fight to recover some of the billions that were wiped out. Plus, the share of legal fees that could go with it. None of the allegations in the lawsuits have been proven. The hearing before Mr. Justice Paul Perell of the Ontario Superior Court began on Tuesday, a day after Sino-Forest was hit with default notices on its debt that could soon tip the company into insolvency proceedings. This kind of legal skirmish, known as a carriage fight, is rare but certainly not unheard of in Canada, where the small number of law firms that specialize in class-actions often make arrangements to work together. In this case, no such deal was forthcoming. On Tuesday, Judge Perell suggested from the bench that one option could be to impose such an arrangement. Lawyer James Orr, of Kim Orr Barristers P.C., said his firm’s lawsuit casts a wide net, naming company officials in China as defendants that the other law firms have ignored for the sake of efficiency. Mr. Orr’s claim also accuses the auditors and underwriters of Sino-Forest of fraud and “recklessness” for failing to report alleged problems with the company that have since surfaced, such as the lack of title documents for its Chinese forest holdings. By doing so, he said, these “experts” enabled investors to sink billions into Sino-Forest.

just six days after short-seller Carson Block and his research firm Muddy Waters LLC accused the company of being an elaborate fraud. pension fund. And they say their list of representative plaintiffs is the most comprehensive. make it the best choice. (All of the Canadian firms vying for the case have affiliations with U.S. as a selling point.” His firm also argues that its large institutional clients in the case. They argue that their narrower approach to naming defendants makes their case more likely to succeed.S. including the British Columbia Investment Management Corp. pointed out that he was first to file a case in Ontario against SinoForest. Orr said. class-action firm Milberg LLP and the inclusion of Milberg’s Michael Spencer. Orr also pointed to his firm’s alliance with U. shareholder class-actions licensed to practise law in Ontario. a large shareholder and a holder of Sino-Forest debt notes. as it includes Canadian pension funds. unlike big pension funds that could afford to launch their own cases if they wished.) Joel Rochon. Mr. has no other way to recoup his losses other than a class-action. a Swedish pension fund. The court also heard from Kirk Baert of Koskie Minsky LLP.S. Mr. of Rochon Genova LLP.” Mr. part of a team with shareholder class-action veteran Dimitri Lascaris of Siskinds LLP in a third Sino-Forest case. Rochon said his proposed representative plaintiff. filing on June 8.“That money went into the company not because a few men came out of the woods in China and said we have a lot of trees. . sales manager Doug Smith of Georgetown. Ont. firms. a veteran of major U. “… There were clean audits year after year. and prospectuses issued..

the company's chief executive. and the company's management has publicly fallen out with some of its major shareholders. This is important is business law as a company or a business needs to be aware of its actions as its clients or competitors or in this case even the stakeholders can sue them as a whole which would make it very hard for the defendant to defend against multiple claims. The second important idea to take away from this article would be the right to information. This would mean providing accurate and complete information in this case. The stakeholders . SinoForest is currently under investigation by Canadian securities regulators and police.a form of lawsuit in which a large group of people collectively bring a claim to court or in which a class of defendants is being sued. In an interim report in November. In their final report they failed to answer key questions about the company's accounting. the consultant has yet to complete work that would prove whether the trees are valued correctly. Judson Martin. When that earlier report was released. Sino-Forest has defaulted on indentures relating to its bonds. said the committee's work was nearly complete and that it hadn't found fraud at the company. the committee's report said. The final report is filled with dry technical detail on the forestry business and marks a stark contrast with an upbeat earlier report on the activities of the investigating committee. Since then. including New Zealand billionaire Richard Chandler. 2. The first allegations were made by a short-selling firm called Muddy Waters LLC few months ago. saying it hired an external timber consultant to test a sample of forestry stock. However. Both issues were key to the claims made by Muddy Waters in June.1. The consultant found that the size and cover of the forest was roughly in line with what the company had reported. Trading in the company's shares on the Toronto Stock Exchange has been suspended since late August. The issues that were not answered by the report included details on certain related party transactions and the valuation of the company's forestry assets. The Main Issue Sino -Forest Corp. The committee took initial steps to value the trees. is a Chinese Timber Company. which included valuing its assets correctly. But the crucial issue was that it wasn't able to place a value on the trees. Two Facts/Ideas from the article that are important to the field of Business Law The first important fact that this article highlights and that is important in the field of Business Law is Class Action Law Suit . The must ensure that they adhere to the best practices and regulations established by that exchanged. the committee said that Sino-Forest owned the trees it claimed to own and confirmed that it accurately accounted for its cash stake.

Global Impact This issue discussed over here definitely has a global impact since the company against whom the claim is filed is based in China and is listed on the Toronto Stock Exchange. It is very important for each publicly traded company to be transparent about their operational activities especially when they are listed on a foreign stock exchange. . Also. 3. This article re-emphasizes the importance of being updated with changing laws in the different countries. The company is also known to have access to wood fibre in Suriname.felt that they were intentionally being kept in the dark about the company’s unfavourable position. The representative plaintiffs include a Canadian pension fund and a Swedish Pension fund. and South America. New Zealand. the stockholders are overseas which complicates the case.