Ontario court approves $10.8-million settlement in Zungui Haixi class-action and awards legal fees, expenses and taxes with interest

Ontario court approves $10.8-million settlement in Zungui Haixi class-action by The Canadian Press, September 6, 2013, The Globe and Mail
An Ontario court has approved three settlements valued at $10.85-million in a class-action lawsuit filed in 2011 against Zungui Haixi Corp., auditors Ernst & Young LLP and several underwriters involved in the Chinese footwear maker’s initial public offering. The approved settlements resolve the claim filed by two Zungui Haixi investors who alleged the IPO prospectus and some disclosures by the manufacturer of sportswear and casual footwear were false or misleading. The settlements end the dispute but aren’t admissions of liability, wrongdoing or fault since all the defendants deny the allegations. The settlements approved by the Ontario Superior Court of Justice call for Zungui to pay $8.1-million, Ernst & Young to pay $2-million and underwriters CIBC World Markets Inc., Canaccord Genuity Corp., GMP Securities and Mackie Research Capital to pay $750,000. The court also awarded legal fees, expenses and taxes with interest totalling $2.81-million that will be paid before the remaining $8.04-million settlement is distributed to class members. Legal fees totalling $2.25-million represent about 20.75 per cent of the gross $10.85-million settlement. … The Ontario Securities Commission conducted hearings in July into allegations of shortcomings by Ernst & Young in its audits of Zungui Haixi. The regulator claimed that the auditors failed to sufficiently heed “multiple red flags” about the revenue and earnings of the disgraced Chinese manufacturer and retailer. [Emphasis added]

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