SEC Files Subpoena Enforcement Action Against Deloitte & Touche in Shanghai

http://www.sec.gov/news/press/2011/2011-180.htm[28-12-2011 20:00:30]

Home | Previous Page

SEC Files Subpoena Enforcement Action Against Deloitte& Touche in Shanghai

FOR IMMEDIATE RELEASE2011-180

Washington, D.C., Sept. 8, 2011 – The Securities and Exchange Commissiontoday filed a subpoena enforcement action against Deloitte ToucheTohmatsu CPA Ltd. for failing to produce documents related to the SEC’sinvestigation into possible fraud by the Shanghai-based public accountingfirm’s longtime client Longtop Financial Technologies Limited.

Additional Materials

SEC court filingApplication

According to the SEC’s application and supporting papers filed in U.S.District Court for the District of Columbia, the SEC issued a subpoena onMay 27, 2011, and D&T Shanghai was required to produce documents byJuly 8, 2011. Although D&T Shanghai is in possession of vast amounts ofdocuments responsive to the subpoena, it has not produced any documentsto the SEC to date. As a result, the Commission is unable to gain access toinformation that is critical to an investigation that has been authorized forthe protection of public investors.

“Compliance with an SEC subpoena is not an option, it is a legal obligation,”said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Theability of the SEC to conduct swift and thorough investigations requires thatsubpoena recipients promptly comply with that legal obligation. Subpoenarecipients who refuse to comply should expect serious legal consequences.”

According to the court papers, D&T Shanghai was Longtop’s auditor since atleast 2007, and the firm consented that its audit reports for Longtop couldbe filed annually with the SEC while knowing full well that they would berelied upon by U.S. investors. On May 22, D&T Shanghai resigned asLongtop’s auditor after discovering numerous improprieties during an auditfor the year ended March 31, 2011. In its resignation letter, which wasincluded in a Form 6-K furnished by Longtop on May 23, D&T Shanghaiidentified numerous indicia of financial fraud at Longtop and indicated thatD&T Shanghai’s prior year audit reports for Longtop could no longer berelied upon by investors.

As part of the Longtop investigation, the SEC staff issued and served thesubpoena on D&T Shanghai seeking production of documents related to theincomplete audit of Longtop for the year ended March 31 as well as prioryear audits that D&T Shanghai completed. According to the court papers,these documents may reveal information about D&T Shanghai’s discovery offalse financial records at Longtop, how any fraud schemes at Longtop wereable to continue undetected, and basic information necessary to ferret outwhether there was a fraud, who was behind it, how significant it was, andhow it was conducted.

SEC Files Subpoena Enforcement Action Against Deloitte & Touche in Shanghai

http://www.sec.gov/news/press/2011/2011-180.htm[28-12-2011 20:00:30]

The SEC’s court papers note that Longtop is a foreign private issuer whoseAmerican depositary shares (ADSs) traded on the NYSE from the date of itsinitial public offering in October 2007 until May 17, 2011, when the NYSEhalted trading prior to delisting Longtop’s securities in August 2011. Whentrading was halted, Longtop’s ADSs were priced at $18.93 per share with 57million shares outstanding, resulting in a market capitalization ofapproximately $1.08 billion.

Pursuant to its application filed in court, the SEC is seeking a court orderdirecting D&T Shanghai to show cause why the court should not enter anorder requiring D&T Shanghai to produce documents responsive to thesubpoena.

# # #

For more information about this enforcement action, contact:

Lisa DeitchAssistant Director, SEC Division of Enforcement 202-551-4999

http://www.sec.gov/news/press/2011/2011-180.htm

Home | Previous Page Modified: 09/09/2011