Northwest & Ethical Investments L.P. is one of two plaintiffs that recently filed a class action lawsuit against a China-based commercial forest plantation operator for allegedly misrepresenting its financials.
Owned 50% by the Provincial Credit Union Centrals in Canada and 50% by Desjardins Group, NEI Investments filed the suit against Sino-Forest Corp. alleging the company misrepresented the integrity of its business operations and financial reporting, and materially overstated its assets and financial results.
Comité syndical national de retraite Bâtirente Inc., a nonprofit organization used by the Confederation of National Trade Unions to set up and promote a workplace retirement system for its affiliated unions, is the other plaintiff in the lawsuit against Sino-Forest.
The plaintiffs said their investors purchased Sino-Forest shares or notes from Aug. 17, 2004 through June 2, 2011. According to the lawsuit, Sino-Forest's securities “suffered severe market declines after the release of an analyst's report on June 2, 2011, which questioned the integrity of the company's asset valuations, revenues, business practices, and financial reporting.”
On Aug. 26, the Ontario Securities Commission ordered a suspension of trading in Sino-Forest's securities finding that the company and some of its officers and directors “appear to be engaging or participating in acts, practices or a course of conduct related to its securities which it and/or they know or reasonably ought to know perpetuate a fraud.”
NEI Investments and Bâtirente said they both raised concerns about the company’s status prior to Sino-Forest’s June 2 analyst report. In January, NEI Investments filed a shareholder proposal encouraging the company to adopt a revised majority voting policy. The proposal was withdrawn when the company committed to adopt the policy. Both NEI Investments and Bâtirente said they withheld their votes for most of the company directors at the company's last annual general meeting in May.
"NEI Investments has a fiduciary duty to protect the interests of our investors and in commencing this action we believe we are acting strongly to uphold the integrity of the investment industry," said Bob Walker, vice president, Ethical Funds at NEI Investments.
NEI Investments has about $5 billion in assets under management, according to the company. With roughly $850 million in assets, Bâtirente has more than 26,000 workers participating in its retirement plans.
According to the lawsuit, prior to its financial decline, Sino-Forest was Canada's leading forestry company with most of its operations in southern China.