Fund manager, Quebec pension sue Sino Forest, auditors, advisers, others

TORONTO - Another suit has been filed on behalf of Sino-Forest Corp. shareholders, this time by fund manager Northwest & Ethical Investments LP and Comite syndical national de retraite Batirente, a Quebec labour-sponsored retirement system.

The suit is seeking class-action status on behalf of investors who bought shares or notes in the troubled Chinese timberland operator between Aug. 17, 2004, and June 2, 2011.

Sino-Forest, once the most valuable forestry company listed on the Toronto Stock Exchange, has seen its shares drop sharply and has come under regulatory scrutiny since short-seller Muddy Waters Research first alleged that it had exaggerated sales and assets in the summer.

The Ontario Securities Commission and the company's board are both investigating the allegations.

The claim period for the latest suit begins 2 1/2 years earlier than another suit filed last month by law firms Koskie Minsky LLP of Toronto and Siskinds LLP of London, Ont., on behalf of two union pension plans.

Both suits are seeking class action status and allege that the defendants fundamentally misrepresented the integrity of Sino-Forest's (TSX:TRE) business operations and financial reporting, and materially overstated its assets and financial results.

Sino-Forest shares last traded at $4.81 on Aug. 25, when a halt was issued. Prior to the Muddy Waters report, the shares had been worth $!8.21 on June 1 before it dropped 20 per cent in one session and continued to fall in the following weeks.

Besides the company, which has an executive office and stock listing in Canada but all of its operations in China, other defendants in the suit include its auditors, 15 financial firms, certain forestry consulting firms as well as 20 directors and senior executives of Sino-Forest.

"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," says Bob Walker, vice-president for Ethical Funds, which are managed by NEI Investments.

"In our long-standing history of engaging with companies to promote responsible corporate governance practices, this is the first time NEI Investments has taken this last-resort approach to protect investors."

Daniel Simard, Batirent's general co-ordinator, also said it is the pension system's duty to seek compensation "from those who bear responsibility."

NEI, Batirent and any other shareholders that are plaintiffs to their action are being represented by Kim Orr Barristers of Toronto and Milberg LLP of New York.