News Brief

New York-Las Vegas Team Prevail in Securities Fraud Case

October 17, 2013

Continuing its success representing accounting firms in Chinese reverse merger cases, Wilson Elser’s national Accountants practice has secured a dismissal of a securities fraud claim against a Utah accounting firm.  A cross-office team from New York and Las Vegas was led by Peter Larkin (Partner-White Plains). He secured dismissal of an $80 million multi-count securities claim brought by sophisticated investors in a China-based company with stock traded in the U.S. 

The plaintiffs alleged that Wilson Elser’s client’s audit of the Chinese company was not conducted in accordance with generally accepted auditing standards as promulgated by the Public Company Accounting Oversight Board and enforced by the Securities Exchange Commission.  According to the plaintiffs, a “proper” audit would have uncovered the massive fraud being perpetrated by the Chinese company, and the plaintiffs would not have invested in the company’s securities. The plaintiffs sued the firm’s client, successive auditors and the company’s underwriters seeking the full value of their investment, more than $80 million.   

Noting that the jurisprudence surrounding audits of China-based companies with stock traded on U.S. markets is constantly evolving, the defense assembled authorities from numerous jurisdictions to argue that the plaintiffs’ complaint was really directed at the underlying fraud, and it lacked specific and sufficient allegations about the audit and the auditors, especially the firm’s Utah-based client. 

The U.S. District Court for Nevada agreed and dismissed the complaint.

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