This week marked perhaps the biggest victory on record for China-focused short-sellers, as the harpoons that Citron Research et al have been flinging at Longtop Financial finally brought the beast down. This was no small-cap reverse-merger fraud: The financial software behemoth had a market cap of more than US$1 billion before trading in its shares was halted last week, and it was taken public on the New York Stock Exchange in 2007 by none other than the great vampire squid itself, Goldman Sachs. Longtop CFO Derek Palaschuk resigned before the scandal broke, but not without first tainting the image of Deloitte Touche Tohmatsu, the firm’s auditor. On a conference call with investors, Palaschuk sputtered, “The most important relations I have other than with my family, my CEO, and then the next on the list is Deloitte, is our auditors, because their trust and their support is extremely important.” (Bet Deloitte loved that one.) Longtop is now facing an investigation from the SEC and a rash of shareholder lawsuits. But really, if you don’t kick a guy when he’s down, when do you kick him?
China Economic Review