Canadian suit expands Sino-Forest allegations

Wed Aug 31, 2011 5:15pm EDT
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By Euan Rocha and Allison Martell

TORONTO (Reuters) - Sino-Forest is facing accusations in a proposed class-action suit that go beyond fraud allegations that have triggered investigations, its CEO's resignation and its removal from Toronto's main stock index.

Two Canadian law firms, Koskie Minsky LLP and Siskinds LLP, said on Wednesday they served a statement of claim against Sino-Forest, once the biggest forestry company on the Toronto Stock Exchange.

The claim, outlined in an 85-page document, is part of C$7 billion proposed class-action suit filed in June against the Chinese forestry company that is suspected of fraud.

Kirk Baert, a partner at Koskie Minsky LLP, said in an interview the fresh allegations stem from investigations carried out over the last six weeks.

The suit targets many of Sino's senior officers and directors -- including its disgraced former chief executive -- as well as its auditor Ernst & Young LLP and the financial institutions that underwrote its 2007 and 2009 prospectus offerings.

"This action raises serious questions about how Sino-Forest conducted its business and affairs, and the manner in which it raised capital from public markets," said Dimitri Lascaris, partner at Siskinds, in a statement.

The Sino-Forest saga is the most prominent of a series of accounting scandals that have tainted the image of Chinese companies listed in North America, prompting trading halts, delistings, lawsuits and regulatory probes in Canada and the United States.