Banks Reach Settlement Over Sino-Forest Stock Sale

TORONTO--A group of Canadian and other investments banks agreed to pay a total of 32.5 million Canadian dollars ($26.1 million) to settle claims related to their role as underwriters to help Sino-Forest Corp. sell stock, in what is believed to be one of the largest settlements of its kind in Canadian history.

The dealers "do not admit any wrongdoing or liability" under the agreement, which would settle shareholder allegations that Sino-Forest's public filings "contained false and misleading statements about (its) financial results, assets, business and transactions," according to a copy of the pact filed with the Ontario Superior court. The agreement still needs court approval.

"We believe this to be the largest underwriter settlement in Canadian history," said a Dimitri Lascaris, a lawyer for Sino-Forest investors.

The dealer group includes the Canadian arm of Credit Suisse Group AG, TD Securities Inc., Dundee Securities Corp., RBC Dominion Securities Inc., Scotia Capital Inc., CIBC World Markets Inc., Merrill Lynch Canada Inc., Canaccord Financial Ltd., Merrill Lynch Canada, and Maison Placements Canada Inc., according to the court documents.

Representatives for the dealers either couldn't be reached for comment or had no immediate comment.

Sino-Forest was once one of Canada's largest forest-products companies listed in Canada, but it collapsed in 2012 amid allegations that it fraudulently inflated the value of its timber assets in China.

The latest agreement comes after Ernst & Young LLP agreed in 2013 to pay C$117 million to settle shareholder allegations related to its role as Sino-forest's auditor, and last year the Ontario Securities Commissions fined Sino-Forest's former chief financial officer C$700,000 for breaching Ontario securities laws and banned the executive from being a director or officer of any Ontario public company.

The commission is in the middle of holding hearings, alleging fraud against five other former Sino-Forest executives, who are contesting the allegations.

Write to Ben Dummett at [e-mail]

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