Vancouver
Silvercorp looks to subpoena anonymous investors
Brenda Bouw
RTGAM
Vancouver - Silvercorp Metals Inc., the China-focused miner battling short-seller allegations of impropriety, says it is teaming up with at least one other company being targeted to try to subpoena the anonymous investors behind the reports.
Rui Feng, chief executive officer of TSX-listed Silvercorp, said Tuesday that his company's lawyers are working with the legal team at Nasdaq-listed Deer Consumer Products, which has launched legal action against a research firm named Alfred Little.
Alfred Little is also behind one of two sets of allegations of wrongdoing against Vancouver-based Silvercorp, including new accusations released Monday that the miner inflated earnings.
"Our lawyers are now working with Deer's lawyers to launch a lawsuit together to subpoena these people behind the scenes," Mr. Feng told investors at the Denver Gold Show in Colorado Springs on Tuesday.
A Silvercorp spokesperson said they have hired lawyers in the U.S. to work with Deer, which was granted a motion by the New York Supreme Court last month to serve Alfred Little with the summons and complaint.
Deer said it filed suit against short sellers and certain bloggers in March, including Alfred Little, alleging "an orchestrated scheme to manipulate and depress" its stock.
Alfred Little alleged in a report that Deer's management failed to disclose millions in rebates it received from a purchase of land use rights.
Deer, which operates in China making household consumer products, denies the allegations of wrongdoing it claims is based on fabricated information and credited to sources with false identities.
On Sept. 6, Deer said Alfred Little had failed to answer its complaint and had "changed his identity from a real person to a website, and attempted to extort the company by threatening to publish more false defamatory reports until the company dropped its claims against these defendants."
On Friday, Deer released another statement claiming Alfred Little offered to issue retractions of various articles "in exchange for Deer dropping its ongoing subpoena and discovery efforts in the Superior Court of the State of New York." Deer said it refused to compromise.
Alfred Little has not yet responded to requests for comment on Deer's latest statement or Silvercorp's decision to have its lawyers team up with them.
"Deer believes its common stock has been manipulated in collusion among "naked" short sellers, which include California and offshore-based hedge funds and individuals that distribute false and fabricated information concerning Deer via various websites and blogs. Deer will continue to pursue all legal actions to protect its shareholders' value," it said in a statement on Sept. 6.
Silvercorp is also considering launching its own legal action against its accusers.
Silvercorp has dismissed the allegations in Alfred Little's reports, as well as those in a second set of anonymous allegations, as "baseless and designed to be manipulative."
Mr. Feng has also vowed to fight back against the anonymous investors he claims are "promoting a distorted form of discrimination" against companies operating in China.
He also called on regulators in the United States and Canada to improve regulations to protect companies from so-called "short and distort schemes."
"There is no regulation to protect a company like us," Mr. Feng said Tuesday.
Meantime, Alfred Little stands by its reports, which were commissioned by anonymous short sellers.
In its updated report on Monday, Alfred Little said Silvercorp has "only selectively and inadequately" addressed its findings, and characterized its reaction to date as typical of companies defending themselves against such allegations.
"The repeatedly announced share buybacks, uploads of hundreds of paper documents (all easily forged), and fist-pounding conference calls categorically denying all allegations have all been done before by many proven frauds," Alfred Little stated in its report.
"Management should not be allowed to simply brush aside this report as false, misleading or defamatory. Nor should management try to escape the facts by attacking the messenger. … We seek only to profit from the truth."
