TORONTO, Nov. 28, 2012 /CNW/ - A class action lawsuit has been commenced
against the accounting firm Schwartz Levitsky Feldman LLP. The action
arises out of Schwartz Levitsky Feldman LLP's involvement as auditors
for a 2010 private placement financing and reverse takeover for
Southern China Livestock Inc., a U.S. company with operations based in
In 2010, Schwartz Levitsky Feldman LLP acted as the auditor of an
indirect U.S. holding company that controlled a Chinese company which
claimed to be in the business of breeding and raising commercial hogs
in China. On March 29, 2010, Expedite 4, Inc. acquired this holding
company in a reverse takeover transaction intended to permit Southern
China Livestock Inc. to become a public entity in the U.S. without
having to undergo the vetting process traditionally required by the
Securities and Exchange Commission (SEC) for new issuers.
After the reverse takeover, and the private placement financing had
closed, investors learned that the Chinese company had little, if any,
control over its hog farm operations, the business was predominately
conducted in cash, and it was therefore highly susceptible to theft and
fraud. Notably, the sale of hogs in China was primarily in cash and the
cash was handled by employees who maintained the funds in their own
bank accounts over which the company had no control. Investors lost in
excess of USD $7 million.
Over the past decade, reverse takeover transactions such as that
undertaken by Southern China Livestock Inc. were very popular with
Chinese companies trying to enter North American public markets.
However, beginning in around 2008, securities and accounting regulators
in Canada and the U.S. began raising concerns about this practice,
including the lack of scrutiny to which these companies have been
subject before entering the North American markets. As a result, this
practice has now effectively dried up.
The proposed class action is brought by Excalibur Special Opportunities
LP, a Toronto-based investment fund, on behalf of the proposed class
comprised of all persons or entities who purchased investment units of
Expedite 4, Inc. between March 29, 2010 and December 23, 2010 and who
continued to hold the units on December 23, 2010.
The statement of claim alleges that Schwartz Levitsky Feldman LLP was
negligent in failing to exercise the care, skill and diligence of a
reasonably competent auditor of a public company and breached its duty
of care to the investors by providing an unqualified "clean" audit
opinion of the company's business when the financial statements were
not a fair presentation of its financial position.
None of the allegations in the statement of claim have been proven in
court, and it is expected the defendant will deny liability.
The Plaintiff is represented by the law firm Paliare Roland Rosenberg
Rothstein LLP. More details regarding the claim are available at:
SOURCE: Paliare Roland Rosenberg Rothstein LLP
Margaret Waddell or Jeffrey Larry, Paliare Roland Rosenberg Rothstein LLP, 155 Wellington Street West, 35th Floor, Toronto, Ontario M5V 3H1.