Settlement between Ernst & Young, Sino Forest shareholders heading to court

By The Canadian Press - Friday, December 28, 2012 at 9:05 AM - 0 Comments

TORONTO – Opponents of a proposed class-action settlement involving the former auditor of Sino Forest have until Jan. 18 to file objections with the Ontario Superior Court ahead of a hearing scheduled for early February.

Auditing firm Ernst & Young has agreed to pay $117 million to a fund to compensate shareholders of the troubled Chinese-Canadian company, which has been accused of fraudulently overstating its assets.

However, a group of fund managers has objected to the settlement, which includes a provision that will prevent them from opting out of the class-action to pursue their own suits against Ernst & Young.

On Friday, the firms representing Sino Forest’s shareholders released a schedule of proceedings leading to a Feb. 4 hearing before the Ontario Superior Court of Justice, which will be asked to approve the class settlement.

Legal motions in favour of the settlement are to be submitted to the court by Jan. 11. Opponents will have a week to file their notices of objection and further pre-hearing proceedings will occur in the following weeks.

The law firms Koskie Minsky LLP of Toronto, Siskinds LLP of London, Ont., and Siskinds Desmeules of Quebec City are representing investors who bought Sino Forest shares between March 31, 2006 and Aug. 26, 2011.

A group of investment firms said on Dec. 7 they would oppose a restructuring plan at Sino-Forest Corp. because it includes the settlement with Ernst & Young.

Comite Syndical National de Retraite Batirente, Northwest and Ethical Investments and Trimark Investments object to the settlement because it would deprive them of the right to sue their audit firm individually.

Sino-Forest: a prolonged moan from the investigators

By Colby Cosh - Thursday, February 2, 2012 at 6:48 AM - 0 Comments

Recommended to those following the Sino-Forest story: the final report from the independent committee empanelled by the company’s board of directors to investigate the company’s claimed assets and its relationships with suppliers. I have to say the report confirms what I thought in June: the issue with Sino-Forest is not necessarily fraud, but with the practical impossibility of confirming almost anything about its secretive business model. The committee did confirm that Sino-Forest’s cash holdings had been reported accurately, and was able to follow some selected title claims to timber more or less back to the actual trees. But with some extra emphasis on the “less”.

Could a curious investor look at actual maps of timber controlled by Sino-Forest agents, you ask? Well, you see, it’s not exactly kosher for foreigners to carry around maps of remote parts of China. You can borrow them from forestry officials if you really need to. Will the local forestry bureaus confirm Sino-Forest’s claims about plantations operated by its agents? Well, sometimes they’ll give you a certificate of sorts, for all the good it might do. “The confirmations are not title documents, in the Western sense of that term,” the committee report notes. (As I understand it, the Western meaning of “title document” is that it gives one an unquestioned, justiciable claim to ownership of something, whether the Party or the Army or the good Lord in heaven approve or not.) Continue…

Really bad investment advice

By Jason Kirby - Tuesday, September 13, 2011 at 10:35 AM - 5 Comments

These days, Richard Kelertas, a financial analyst at Dundee Securities, isn’t saying much about Sino-Forest, the beleaguered Chinese forestry company at the centre of a fraud investigation by regulators. “I’m not speaking with the press or anyone, unfortunately,” he says. That is unfortunate, because a lot of investors who followed Kelertas’s advice to buy Sino-Forest’s shares—either before the company got into trouble, when he insisted Sino-Forest was a “class act in timberland management in China,” or after, when he called the fraud allegations a “pile of crap”—no doubt have a few choice words for him.

The Sino-Forest debacle has the potential to be the biggest stock market scandal to hit Canada since the Bre-X gold-mining fraud in the mid-1990s. Until June, Sino-Forest was the most valuable forestry company on the Toronto Stock Exchange, with a market capitalization of $6 billion. Then Muddy Waters Research, a U.S. investment firm, issued a damning report that claimed Sino-Forest “massively exaggerated its assets” and is nothing more than a Ponzi scheme. Muddy Waters said it was short selling Sino-Forest, or betting that the company’s share price would plunge. It did. By the time the Ontario Securities Commission suspended trading in the stock on Aug. 26 and raised its own concerns about fraud, Sino-Forest had shed three-quarters of its value.

At this point none of the allegations have been proven. The OSC’s accusations of fraud at the company could ultimately prove unfounded. This still may turn out not to be “Tree-X.” Even so, investors would be right to wonder why a company with the potential to completely collapse on the basis of a single critical report was regarded so highly by analysts in the first place. Kelertas wasn’t alone in his effusive praise of the company in recent years. Of the 10 analysts covering Sino-Forest before the Muddy Waters report hit the street, nine rated the stock a “buy” or “outperform,” while just one considered it a “hold,” according to Reuters.

Continue…

Good news, bad news: August 25-31, 2011

By macleans.ca - Monday, September 5, 2011 at 3:30 PM - 0 Comments

Good news

Manish Swarup/AP

Safe passage

Plans to build a 4,300-km pipeline between the Alberta oil sands and refineries in Texas will have “no significant” environmental impact, according to a U.S. State Department report. Although the controversial conclusion sparked a mini-protest outside the White House (a NASA scientist was among those arrested), the report confirms the obvious: America needs Canadian oil, and the Keystone XL pipeline is the safest way to get it there. The project will also create thousands of jobs on both sides of the border—an economic benefit that, unlike the environmental fears, is very real.

Tweaking social networks

Facebook beefed up its privacy settings last week, giving its 300 million users more streamlined control over who gets to see their personal photos. Britain, meanwhile, dropped a controversial proposal that would have granted police the power to arbitrarily shut down social networking sites in times of crisis. (The short-lived plan came after rioters in England used Twitter and Facebook to coordinate their mayhem.) Taken together, the decisions strike a fine but necessary balance in this age of tweets and pokes. Privacy is a right, but so is free speech.

Continue…

Securities commission backtracks on Sino-Forest ruling

By macleans.ca - Friday, August 26, 2011 at 11:55 AM - 1 Comment

In an unusual reversal, the Ontario Securities Commission has rescinded an order to top officials from beleaguered timber firm Sino-Forest to resign amid continued allegations the company misrepresented assets. The commission had put a 15-day freeze on trading in Sino-Forest shares as part of the move, which prompted Standard & Poor’s to downgrade the company’s stock. Sino-Forest shares first tumbled in June after a short seller’s report accused the firm of being little more than a Ponzi scheme. The OSC did not explain why they had reversed their position.

Globe and Mail

Shares tumble as Sino-Forest postpones promised tour

By macleans.ca - Wednesday, July 6, 2011 at 12:51 PM - 0 Comments

Shares of the Chinese company Sino-Forest tumbled Wednesday on the TSX, dropping as much as 20 per cent after the company announced the postponement of a promised tour of its forestry assets. The company said it has delayed the tour because of a recent lack of coverage from analysts. Last month, the value of Sino-Forest shares and bonds plummeted after accusations were made that the company was exaggerating the size of its assets in China. Sino-Forest has denied these allegations and is conducting an internal review to investigate the matter, which may take up to three months to complete.

Reuters

Sino-Forest or sigh-no-forest?

By Colby Cosh - Tuesday, June 21, 2011 at 8:23 AM - 22 Comments

Timber company Sino-Forest is locked in a fascinating battle for survival against Carson Block, a stock analyst with a mixed record of publicity attacks on Chinese-based enterprises. With professional analysts reluctant to say what they make of Block’s “strong sell” report on Sino-Forest, I’m in no position to endorse it as a piece of financial advice or investigative journalism. Considered strictly as entertainment, however, the report is remarkable. Continue…