Oct. 8 (Bloomberg) -- Deloitte Touche Tohmatsu CPA Ltd. should be ordered to appear in a U.S. Court for rejecting a Securities and Exchange Commission demand for documents related to an investigation of its former client Longtop Financial Technologies Ltd., an SEC lawyer said.
In a hearing yesterday in Washington, SEC lawyer Mark Lanpher said the Shanghai-based unit of Deloitte Touche Tohmatsu Ltd. has refused to respond to a court filing seeking documents that the regulator claims are “critical” to its probe of possible fraud at Longtop, a financial software maker based in Hong Kong.
“We have an ongoing fraud. Time is of the essence,” Lanpher said, asking U.S. Magistrate Judge Deborah Robinson to approve a “show cause” order requiring D&T Shanghai to appear in court to explain why it hasn’t complied with a subpoena issued in May.
Robinson responded that she needed more information from the SEC regarding her authority to require a foreign company to appear in a U.S. court. She gave the SEC until Oct. 14 to make that argument in a court filing.
Michael Warden, a lawyer for D&T Shanghai, was in the courtroom yesterday. He didn’t address the judge and declined to comment after the proceeding. In a July 8 letter to the SEC, Warden said China law prevented his client from turning over documents.
Longtop said in May that D&T Shanghai quit because of errors in the company’s financial records. The SEC also began an investigation. In July, the SEC and the Public Company Accounting Oversight Board met with counterparts in China to discuss cross-border oversight.
D&T Shanghai resigned as Longtop’s auditor after discovering numerous improprieties during the year ended March 31, 2011, according to the SEC. The SEC issued a subpoena for documents it said may contain basic information necessary to determine whether there was a fraud, who was behind it and how it was conducted, according to the court filing.
The New York Stock Exchange delisted Longtop’s American Depositary Shares in August.
The case is U.S. Securities and Exchange Commission v. Deloitte Touche Tohmatsu CPA Ltd., 11-mc-00512, U.S. District Court, District of Columbia (Washington).
--With assistance from Joshua Gallu in Washington and Dune Lawrence in New York. Editors: Mary Romano, John Pickering
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