August 10, 2022

Deloitte Suggests SEC Call the PCAOB If It Wants Those Longtop Documents

Last Friday, the PCAOB announced it had reached Memorandum of Understanding on Enforcement Cooperation with Chinese Regulators. While not a great deal for the Board, most people agreed that, at the very least, it's good for formally asking the Chinese, "Pretty please with sugar on top, may we have a peek at these documents?"

Which is why Deloitte's Chinese affiliate, who has been stonewalling the SEC for documents related to Longtop Financial, has suggested the Commission just ask their friends at the PCAOB to get whatever it is they need. Of course Deloitte made this suggestion by requesting a judge dismiss the SEC's case against the firm:

Lawyers for Deloitte Touche Tohmatsu CPA, LTC. argued in a court filing that the Securities and Exchange Commission has "alternative means" to get the documents, which the SEC says it needs as part of its fraud investigation of Deloitte client Longtop Financial Technologies Ltd. The filing by Deloitte came just a few days after the Public Company Accounting Oversight Board and Chinese regulators struck a partial deal after a two-year stand-off that has blocked the United States from probing accounting scandals at dozens of Chinese firms listed on U.S. stock exchanges.
Maybe I'm wrong, but this strikes me as hilarious because Deloitte, up until this point, has claimed that it cannot turn over the documents in question because it would violate Chinese law. And in the the MOU between the PCAOB and Chinese there is an exception citing this exact situation!
(b) A request for assistance may be denied on an exceptional basis by the Requested Party:
(i) where the request would require the Requested Party to act in a manner that would violate domestic law;
So unless the agreement between the PCAOB and Chinese regulators managed to change Chinese law, a hypothetical scenario where the PCAOB requests documents on Longtop on the behalf of its pals at the SEC would likely result in a denial!
That seems plausible, no? A Duke law professor has a different suggestion for the firm:
"Deloitte can simply just end the situation by producing the records," said Jim Cox, a professor at the Duke University School of Law. "This strikes me as little more than a smoke screen and the SEC would be well advised to keep this matter before the federal court." 
Can't blame them for trying, I guess.

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