Silvercorp hit by pair of class action lawsuits
Silvercorp Resources faces class action lawsuits in New York for allegedly misleading investors.
Posted: Sunday , 06 Jan 2013
SEATTLE, WA (MINEWEB) -
A second U.S.-based law firm, Bernstein Liebhard LLP, has filed a class action lawsuit against Silvercorp Resources alleging the junior silver miner misled investors by overstating “the level of silver production at its mines, as well as the quality and quantity of its ore reserves.”
The allegations, which are similar to ones made in a separate class action lawsuit filed against Silvercorp this week by the Rosen Law Firm, have not been proven in court. While a Silvercorp spokesperson could not immediately be reached for comment, Silvercorp has in the past denied similar allegations.
Indeed, the lawsuits by Bernstein Liebhard and Rosen are largely hung on short-selling reports by Jon Carnes, a once anonymous short seller, who published numerous scathing research papers last year alleging Silvercorp had inflated silver production and reserve grades and overstated profits.
The papers - published on the Internet by Carnes’ website Alfredlittle.com - incensed Silvercorp management, who denied the allegations, and labelled Carnes’ attack a stock manipulation scheme. Silvercorp then sued Carnes in the New York County Supreme Court.
But in a stinging loss for Silvecorp, the case was dismissed this year when the presiding judge decided Carnes had the right to publish his papers as statements of opinion. Silvercorp has appealed the decision.
Since then the controversy over the short selling reports has not blown over, but grown to include allegations Silvercorp worked closely with Chinese police - even covering some of their expenses - in the arrest of a Canadian-Chinese researcher working for Carnes in China.
A report by the The Globe and Mail recounts allegations made by Huang Kun, arrested earlier this year by Chinese police in connection with his work for Carnes, that Silvercorp footed police hotel bills at an establishment he was taken to for numerous rounds of questioning. Kun further alleged that Silvercorp received information contained in his laptop that was confiscated by Chinese police.
Silvercorp president and CEO Rui Feng, however, has denied the claims, saying such reported evidence was falsified and that any information it used in court came from public documents or through its own investigation into Carnes (as reported by The Globe and Mail).
It would appear the RCMP - federal police in Canada - are nonetheless looking into the matter. An RCMP officer told the The Globe and Mail that the police force was assessing a complaint about Silvercorp. An RCMP officer on the case was unavailable for comment on Friday afternoon (Pacific Standard Time).
Amidst all the allegations and denials one thing is clear: Silvercorp’s shareprice continues to founder. On Friday, the day after the second class action lawsuit was announced, Silvercorp’s shareprice hit a new 52-week low, and as of by Friday afternoon was trading at C$4.72 - a far cry from the C$14 heights it hit early last year before the short selling reports were released.