Suntech Execs Off the Hook in Securities Suit
(CN) - Suntech Power Holdings shareholders stung after reports of a fraud caused stock prices to plummet cannot hold the solar energy firm's executives liable, a federal judge ruled.
Suntech, based in China and incorporated in the Cayman Islands, designs, manufactures and markets photovoltaic technology used to provide electricity for residential, commercial, industrial and public utility customers worldwide.
Lead plaintiff Scott Bruce sued Suntech and the company's CEO Zhengrong Shi, CFO David King and former CFO Amy Yi Zhang for violation of the Securities and Exchange Act. Julian Worley and David Hogg are also named as defendants.
The class said Suntech and its officers should have known that the $772 million in German government bonds that a third party pledged as part of a Suntech loan guarantee did not exist.
As such the class alleged that the company and its executives made material misrepresentations about the extent of Suntech's liabilities during the class period.
Suntech stocks dropped once word got out, causing prices to fall by as much as 15.67 percent, closing at $1.13 on July 31, 2012.
Suntech's involuntary petition for bankruptcy led to an automatic stay of the claims against it.
U.S. District Judge Richard Seeborg meanwhile agreed Thursday to dismiss the claims against Shi and King, who are not subject to the stay, for failure to state a claim. He noted that Zhang, the former CFO, had not joined the motion to dismiss because she was never served.
The claim against King meanwhile is weakened by the fact that he started working for Suntech a year after the loan guarantee was consummated, according to the ruling.
"Plaintiff's non-specific allegations that King's position as CFO gave him 'access to material non-public information' about the true value and nature of the loan guarantee are insufficient to show fraudulent intent," Seeborg wrote.
Suntech is one of three Chinese solar companies sued by Solyndra under the Sherman Antitrust act in 2012. The now bankrupt American solar company alleges that Suntech, Trina Solar and Yingli Green Energy conspired to corner the U.S. market by dumping solar panels at less than cost.
Another bankrupt American solar company, Energy Conversion Devices, filed a similar lawsuit in October 2013, claiming the same companies engaged in unfair trade practices.
Bruce has 30 days to amend the dismissed claims, according to the ruling.