A judge in Washington today sided with federal securities regulators in a spat over whether the accounting firm Deloitte Touche Tohmatsu Ltd. can be forced to appear in court to respond to a subpoena seeking documents in a fraud probe.
The U.S. Securities and Exchange Commission wants the Shanghai unit of Deloitte Touche Tohmatsu Ltd. to turn over information about its work for a Cayman Islands-based company called Longtop Financial Technology Ltd. The SEC sued Deloitte in September in Washington federal district court.
Magistrate Judge Deborah Robinson of U.S. District Court for the District of Columbia on Wednesday granted the SEC’s application for an order to show cause, a decision that triggers subpoena enforcement proceedings. Click here for the judge's decision.
The SEC said in court papers that D&T Shanghai audited Longtop’s financial statements for several years. Longtop’s principal offices are in Hong Kong and Xiamen, China, the SEC said. In May, D&T Shanghai resigned from its auditing services for Longtop, according to SEC lawyers.
The subpoena enforcement dispute stalled in court when Robinson asked the SEC to provide more information about the court’s authority to compel a company to appear in court when it has not been served with a show-cause application and has not made an appearance in the case.
Robinson, after studying the issue, said in her ruling that the “service of the application is not a prerequisite to the issuance of the proposed show-cause order.”
The judge also said the U.S. Court of Appeals for the D.C. Circuit “has repeatedly approved the issuance of a show cause order in a miscellaneous action brought by an agency, commission or corporation of the United States in the absence of prior service of the application on the respondent.”
A lawyer for D&T Shanghai, Michael Warden, a Sidley Austin accounting and professional services liability partner in Washington, was not immediately reached for comment Wednesday evening.
Once again, the SEC attempts to nail with rubber mallets. What dilatory procedural nonsense!
Posted by: Tim Morgan | January 05, 2012 at 01:24 PM