SEC clashes with Deloitte over China fraud case

The US Securities and Exchange Commission on Thursday publicly criticized Deloitte Touche Tohmatsu for the accounting firm’s failure to turn over financial records for Longtop Financial Technologies (LFT.NYSE), a Chinese company that is under investigation for fraud, the New York Times reported. In a public statement, the SEC said it had issued the accounting firm a subpoena on May 27 to turn over the records but that Deloitte had ignored the request. The investigation remains at a standstill as a result, the SEC said. “Compliance with an SEC subpoena is not an option, it is a legal obligation,” the SEC statement said. “Subpoena recipients who refuse to comply should expect serious legal consequences.” Following a volley of a reports from independent short-seller firms like Citron Research, Deloitte resigned in May as the auditor of Longtop Financial, saying the company did not have the cash it claimed and that there were “significant bank borrowings” not reflected on its books. Deloitte had given the company a clean bill of financial health for several years.