NEW YORK, Nov 24 (Reuters) - A U.S. jury on Monday said a former top executive of China’s Longtop Financial Technologies should pay damages to shareholders that could reach several million dollars, in one of the rare securities class actions to go to trial.
The damages verdict followed an earlier decision by the Manhattan federal jury on Friday finding Derek Palaschuk, the former CFO, liable for being reckless in making untrue statements or omitting facts about the Chinese technology company.
Daniel Berger, the investors’ lawyer, said Palaschuk could be forced to pay around $5 million after Monday’s verdict, though the exact amount will be subject to further proceedings.
“It’s great they held him responsible,” Berger said.
John Sylvia, Palaschuk’s lawyer, called the plaintiffs’ damages estimates “pie in the sky.” Palaschuk’s lawyers plan to ask a judge to set the verdict aside.
The verdict was a rarity in U.S. securities class actions, having only resulted in 13 other cases involving conduct after 1995, when the laws changed, said Adam Savett, director of class action services at Kurtzman Carson Consultants.
The lawsuit, filed in 2011, was one of several cases launched amid accounting scandals at Chinese companies trading on U.S. stock exchanges.
Based in Xiamen, China, Longtop had a $1.08 billion market value when the New York Stock Exchange halted its trading in May 2011. Days later, Palaschuk resigned, followed by Longtop’s auditor, Deloitte Touche Tohmatsu CPA Ltd.
Before resigning, Palaschuk spoke with Longtop CEO Weizhou Lian. In an email memorializing the call presented during trial, Palaschuk said Lian “informed me the company had been a fraud since 2004.”
The investors who sued accused Palaschuk of missing “red flags” of the fraud. He denied wrongdoing.
On Monday, jurors found Longtop’s American depositary shares were inflated due to the securities law violations from Feb. 10, 2010 to May 17, 2011, by $11.89 to $19.51 per share.
While jurors said Palaschuck helped cause the investors’ losses, they said he shared only 1 percent of the responsibility.
Instead, they assigned 49 percent of responsibility to Longtop and 50 percent to Lian, both accused of fraud by the plaintiffs.
A judge entered a $882.3 million default judgment against them in 2013 after neither appeared in court.
The case is In re Longtop Financial Technologies Limited Securities Litigation, U.S. District Court, Southern District of New York, No. 11-03658. (Reporting by Nate Raymond in New York)