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SEC Deloitte Case Slowed In Federal Court

October 10, 2011
A federal judge has put the brakes on the U.S. government's attempt to quickly get documents related to possible accounting fraud at Chinese companies listed on U.S. stock exchanges. U.S. Magistrate Judge Deborah Robinson questioned whether she could force a Chinese unit of accounting firm Deloitte & Touche to hand over records to the SEC. In September the SEC asked the court to enforce a subpoena it sent to Deloitte seeking information about its Chinese unit's audits of Longtop Financial Technologies Ltd, a Chinese company under investigation by the regulator. Dozens of China-based companies have disclosed auditor resignations and book-keeping irregularities in the past year, prompting a broad SEC and Justice Department review. But the probes have stalled as investigators face difficulties in obtaining documents and evidence from auditors in China. On Friday, Robinson asked why the agency was not going through procedures set up by the Hague Convention to access that information and is instead going through U.S. courts. That route would mean a delay on the order of months, SEC lawyer Mark Lanpher said in court. Lawyers for Deloitte have not formally acknowledged to the court that they are representing Deloitte or even have the motion since Deloitte is not technically a defendant. That status that slows the process further. For now, Robinson ordered the SEC to submit by this Friday a brief outlining precedent for the court to force Deloitte to respond. The SEC must also show that it doesn't have to go through the Hague first. [Reuters, 10/7/11]