WASHINGTON (CN) - The Deloitte Touche Tohmatsu accounting firm cannot delay a subpoena it faces from the Securities and Exchange Commission, a federal judge ruled.
Deloitte, a Chinese firm, had objected after a magistrate judge lifted the stay last month. It argued that the stay should have been extended because of the significant overlap between this civil case and the pending administrative proceedings that the SEC brought against it in December 2012.
Though the firm claimed that it would face a hardship litigating both cases, the SEC insisted that the two cases are not parallel.
The SEC argued that its subpoena of Deloitte does not seek any sanctions against the firm; it simply seeks the production of relevant documents, which cannot be retrieved in the administrative proceedings.
Continuing the stay indefinitely would also halt a fraud investigation into Deloitte's longtime client Longtop Financial Technologies, the SEC argued, noting that this is the very reason why it subpoenaed Deloitte in May 2011.
Noting that "the SEC has a responsibility to complete this investigation and pursue these documents in a timely fashion in the venue available to it," U.S. District Judge Gladys Kessler sided with the commission last week.
"A thorough, comprehensive investigation only gets more difficult with the passage of time," she wrote.
Deloitte and four other China-based auditing firms face administrative proceedings by the SEC for allegedly refusing to produce documents related to the Longtop investigation.
Those proceedings seek to bar all five companies from appearing or practicing before the commission. All five firms assert that producing the documents would be a violation of Chinese law and could lead to imprisonment if they are convicted. An initial ruling in this case is expected in late September 2013.
Kessler concluded that "there will be no significant burden placed on Deloitte by requiring it to litigate the two very different proceedings simultaneously."
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