A class action lawsuit was filed charging China Expert Technology, Inc. with violations of the federal securities laws. The Complaint alleges that the company knowingly issued materially false financial statements and other misleading statements concerning its business. During the Class Period, CXTI issued materially false and misleading statements and omitted to state material facts that rendered their affirmative statements misleading as they related to the Company’s financial performance, business prospects, and financial condition. As a result of these materially false and misleading statements, the price of the Company’s securities was artificially inflated to a Class Period high of over $8.00 per share. As the truth of the Company’s materially false and misleading statements entered the market, the Company’s stock plummeted to pennies and was even halted by the SEC.
On March 17, 2008, Judge Alvin K. Hellerstein signed the plaintiff’s notice of voluntary dismissal, dismissing the individual defendants named in the complaint. On March 25, 2008, certain plaintiffs were appointed lead plaintiffs. The Order further approved the Rosen Law Firm, P.A. as lead counsel. On March 27, 2009, an Amended Complaint was filed. In April and June 2009, the defendants filed motions to dismiss, and on September 30, 2009, Judge Alvin K. Hellerstein granted with prejudice the motion of Defendant BDO Seidman, LLP. The motion of defendant PKF New York, Certified Public Accountants, a Professional Corporation, was granted without prejudice. On October 29, 2009, the plaintiffs filed a Second Amended Complaint. On December 14, 2009, the defendants filed several motions to dismiss the Second Amended Complaint.
On April 16, 2010, Judge Alvin K. Hellerstein granted the defendants’ motion to dismiss and dismiss the complaint without prejudice, giving leave for the plaintiffs to replead. On May 28, 2010, the plaintiffs filed a Third Amended Complaint. On July 27, 2010, the defendants filed motions to dismiss the Third Amended Complaint. The plaintiffs again amended their complaint by filing a Fourth Amended Complaint on April 4, 2011. On May 6, 2011, the defendants responded by filing motions to dismiss.
According to a press release dated July 20, 2011, U.S. District Judge Alvin Hellerstein in New York had previously dismissed the suit three times, saying the shareholders' claims were inadequate. But Hellerstein reversed course and on Tuesday said he would allow the lawsuit against China Expert's outside auditors, PKF Hong Kong, PKF New York and BDO McCabe Lo Ltd, to proceed. BDO McCabe is the predecessor firm to BDO Limited, the Hong Kong member of the vast accounting network of BDO International. 'Enough has been alleged to make out a plausible claim for relief,' Hellerstein declared in a handwritten order. He did not rule on the merits of the case but instead simply allowed shareholders' claims to proceed to the next phase. The ruling was filed on Tuesday. Hellerstein's ruling allowing investors to pursue China Expert's auditors is one of the first of its kind in a slew of class-action lawsuits against China-based companies. It offers a potentially lucrative channel for shareholders who set their sights on deep-pocketed defendants as they grapple with potential roadblocks in pursuing China-based companies in U.S. courts.
The defendant PKF New York filed a motion to dismiss the Fourth Amended Complaint on August 26, 2011. The motion was denied on November 7, 2011.
On June 5, 2012, the Court issued a Summary Order granting the Plaintiff's motion for class certification.
On February 20, 2014, the Court entered an Order awarding attorneys' fees and expenses. This was followed by an Order and Final Judgment granting final approval of the Settlement and closing this case.