SEC Tells Deloitte Touche to Come Clean

WASHINGTON (CN) - The SEC on Thursday asked a federal judge to enforce a subpoena on Deloitte Touche Thomatsu CPA, in Shanghai, for the SEC investigation of possible fraud in the accountancy's longtime client Longtop Financial Technologies Ltd.

The SEC said Deloitte Touche was subpoenaed on May 27 and required to produce documents by July 8, but despite its possession of "vast amounts of documents responsive to the subpoena, it has not produced any documents to the SEC."

"Compliance with an SEC subpoena is not an option, it is a legal obligation," SEC Enforcement Director Robert Khuzami said in a statement.

"On May 22, D&T Shanghai resigned as Longtop's auditor after discovering numerous improprieties during an audit for the year ended March 31, 2011," the SEC said in announcing its latest court filing. "In its resignation letter, which was included in a Form 6-K furnished by Longtop on May 23, D&T Shanghai identified numerous indicia of financial fraud at Longtop and indicated that D&T Shanghai's prior year audit reports for Longtop could no longer be relied upon by investors."

The SEC said it seeks information "about D&T Shanghai's discovery of false financial records at Longtop, how any fraud schemes at Longtop were able to continue undetected, and basic information necessary to ferret out whether there was a fraud, who was behind it, how significant it was, and how it was conducted."

The New York Stock Exchange "halted trading prior to delisting Longtop's securities in August," the SEC said. Its shares were selling for $18.93 and there were 57 million shares outstanding, giving it a market cap of $1.08 billion.

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