SEC May Get to Rake Deloitte on Subpoena

     (CN) – After failing to collaborate with Chinese securities regulators, the U.S. SEC can try to subpoena Deloitte Touche Thomatsu here, a federal judge ruled.
     The Securities and Exchange Commission first subpoenaed the Chinese-based Deloitte in May 2011 as part of a fraud investigation into the accounting firm’s longtime client Longtop Financial Technologies.
     After trying to enforce that subpoena, the SEC requested a six-month stay of the proceedings to work with Chinese officials on a way for it to obtain papers from Chinese-based firms in connection with its enforcement actions.
     In the meantime, the SEC filed a December 2012 federal complaint against Deloitte and the four other biggest Chinese-based accounting firms that it accuses of obfuscating its fraud investigation.
     After its talks with Chinese regulators broke down, the SEC moved to lift the stay in January 2013. Deloitte meanwhile filed to extend it, claiming that the 2012 lawsuit represents a “parallel litigation of core issues, according to the ruling.
     Deloitte argued a stay would “avoid piecemeal, unfair, and inefficient resolution,” while no stay would lead Deloitte to be “unfairly singled out.”
     The SEC claimed, however, that the Longtop investigation does not factor in whatsoever to the 2012 complaint, and that the new case cannot compel production of documents.
     It said continuing the stay would “essentially put the SEC’s Longtop investigation on indefinite hiatus.”
     U.S. Magistrate Judge Deborah Robinson agreed with the agency on Monday, saying Deloitte’s “broad characterization does not accurately reflect the narrow scope of review before this court.”
     “The issues are not likely to overlap to an extent which would render the parallel proceedings inefficient,” she wrote.
     “Further, staying this proceeding for an indefinite period will not promote judicial efficiency,” Robinson added.
     The SEC’s bid to have Deloitte comply with the subpoena will face a hearing on March 13 at 2:30 p.m.

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