According to the law firm press release, SQM is engaged in the production and distribution of specialty plant nutrients, iodine and its derivatives, lithium and its derivatives, potassium chloride and potassium sulfate, industrial chemicals, and other commodity fertilizers.
The Complaint alleges that throughout the Class Period, Defendants made materially false and misleading statements regarding the Company's business, operational and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (1) money from SQM was channeled illicitly to electoral campaigns for the Independent Democratic Union ("UDI"), Chile's largest conservative party; (2) the Company lacked adequate internal controls over financial reporting; and (3) as a result of the foregoing, the Company's financial statements were materially false and misleading at all relevant times.
Chile's Attorney General announced on February 24, 2015 that he would lead the investigation into the escalating bribery and tax evasion scandal involving the financial firm Banco Penta ("Penta" or the "Penta Group"), a corruption scandal which has embroiled numerous politicians across the country's political spectrum.
On February 26, 2015, SQM issued the first of a series of disclosures, which, for the first time, publicly linked the Company to the ongoing UDI contribution scandal and ultimately culminated in the termination of the Chief Executive Officer and resignation of three SQM Board members. The Company disclosed in a press release that, at the request of the Chairman of the Board of SQM, an extraordinary Board meeting was held to analyze the ongoing political scandal and the Attorney General's investigation. In such meeting, the Board resolved to establish a special committee.
On March 11, 2015, SQM disclosed that its Board of Directors would meet the next day to evaluate the request by the Public Prosecutor for delivery of certain information pertaining to the alleged bribery scandal.
On March 16, 2015, the Company announced that it had turned over all of the information requested by the Public Prosecutor in the March 6, 2015 Letter to the Chilean Internal Revenue Service for the last six years, which the Company purported was the proper authority to review such information. Moreover, the Company also announced that the Board had agreed to terminate the Company's CEO effectively immediately. In the prior weeks, the CEO had attempted to block the Company's decision to turn over the documents.
As a result of these partial disclosures, SQM stock consistently traded downward, from a closing price of $26.17 per share on February 25, 2015, to close at $22.10 per share on March 17, 2015, a decline of 15.55% on unusually heavy trading volume during that period.
On March 18, 2015, SQM issued a press release indicating that the three representatives on its Board from Canadian stakeholder Potash Corporation had resigned the prior day.
As a result of this news, shares of SQM fell an additional $3.45 per share, or more than 15.6%, on extremely heavy volume, to close at $18.65 per share on March 18, 2015.