OSC to hold hearing on settlement agreement with former Sino-Forest executive

TORONTO – The Ontario Securities Commission has reached a proposed settlement with the former chief financial officer of Chinese forestry company Sino-Forest Corp., which collapsed under allegations of being a massive fraud.

David Horsley is accused of not complying with Ontario securities law and acting contrary to the public interest.

Details of the tentative settlement will not be made public unless it is approved at a hearing on July 21.

The allegations against Horsley were first brought by the Ontario regulator in the spring of 2012.

Horsley stepped down as chief financial officer at Sino-Forest in April 2012 and parted ways with the company in September 2012.

Five other executives — Allen Chan, Albert Ip, Alfred C.T. Hung, George Ho and Simon Yeung — are also accused of lying to investors and misleading investigators by engaging in a “complex fraud scheme to inflate the assets and revenue of Sino-Forest,” according to OSC documents.

The OSC said a hearing will be held in September regarding the other five accused.

From June 2006 to March 2011, the Toronto-listed forestry company saw its stock price soar by 340 per cent from $5.75 a share, to $25.30. At its peak, Sino-Forest’s market capitalization was worth more than $6 billion.

But in 2011, Sino-Forest was accused of being a fraud by U.S. firm Muddy Waters Research, prompting investigations by the OSC and the RCMP. The allegations sent the company’s share price plummeting.

A year later, the company said that investors should no longer rely on the accuracy of its previous financial statements or audit reports.

Its auditors resigned in April 2012. A month later, the company’s shares delisted on the Toronto Stock Exchange.

Last year, the Ontario Superior Court approved a $117-million class-action settlement involving Sino-Forest and its former auditor, Ernst & Young. The agreed deal saw the accounting firm pay towards into a fund to compensate shareholders after the firm was accused of fraudulently overstating its assets.