By Sarah N. Lynch
WASHINGTON Jan 27 U.S. regulators and
Deloitte's Chinese unit have resolved a legal dispute
over access to audit work papers related to a fraud
investigation into Longtop Financial Technologies, a Chinese
The Securities and Exchange Commission and Deloitte Touche
Tohmatsu CPA Ltd on Monday filed a joint motion to have the
lawsuit, which was more than two years old, dismissed in U.S.
District Court for the District of Columbia.
The SEC told the court that Chinese regulators have since
turned over many of the documents being sought.
"In light of the substantial volume of documents
produced ... the SEC, at present, does not believe that there is
a need for judicial relief," the motion said.
The SEC's case against Deloitte is one of two enforcement
matters the agency has been pursuing in its quest to obtain the
audit documents of Chinese companies listed in U.S. markets.
In a major move in the second big case involving the Chinese
units of the "Big Four" global accounting firms, an SEC
administrative law judge last week ruled that those units should
be suspended from practicing in the United States for six
months. The judge ruled that the units had failed to comply with
similar SEC document requests in connection with nine Chinese
The suspension will not go into effect, however, until the
appeals process is exhausted. The Chinese units have all said
they plan to appeal. In addition to Deloitte, the Big Four are
PricewaterhouseCoopers, KPMG and Ernst & Young.
The Deloitte case resolved on Monday differs because the SEC
was only trying to enforce a subpoena. In the other case, the
agency was seeking to punish the accounting firms for failing to
comply with U.S. laws.
The SEC has been testing out a variety of enforcement and
diplomatic tactics to get the audit paperwork it needs to
investigate a rash of accounting scandals that have plagued many
China-based companies listed in the United States.
The accounting firms, however, have resisted amid concerns
they may violate Chinese secrecy laws by sharing the paperwork
with the U.S. government.
Last July, the United States and China struck an agreement
in connection with the investigation into Longtop, a technology
company. Chinese regulators handed over 200,000 pages to the
In Monday's filing, the SEC told the court it had received
additional paperwork from Chinese regulators earlier this month.
Although the SEC agreed to drop its case against Deloitte
for now, the agency said it may seek the court's help down the
line if the materials it received prove inadequate.
The dismissal of the case is still subject to court