SAN FRANCISCO (CN) - Chinese solar company Suntech Power Holdings and its former chief executive must face a class action accusing them of lying to investors, a federal judge ruled.
A "strong inference" can be made that former Suntech CEO Zhengrong Shi knowingly made false public statements about the company's liabilities before a scandal broke that plummeted Suntech's stock prices, the Tuesday ruling states.
New evidence, including emails and internal Suntech documents, support the ruling, U.S. District Judge Richard Seeborg said.
Shi had moved to dismiss in late March after the plaintiffs led by Scott Bruce provided the documents with the second amended complaint. An earlier version of the complaint lacked sufficient facts
to support the class's claims, but the new version "fares better," Seeborg wrote.
Bruce alleges that Suntech and Shi kept shareholders in the dark though they knew that there was something wrong with the more than $700 million in German government bonds pledged as part of a Suntech loan guarantee. When the company admitted the bond pledge by investment fund Global Solar Fund Capital had been fabricated, stock prices nosedived 15 percent, closing July 30, 2012, at $1.34 a share.
Several 2009 emails from Global Solar Fund official Javier Romero to Shi say that the loan guarantee collateral should be kept confidential from the market, according to the plaintiffs' amended complaint. Additional correspondence allegedly shows that the company never conducted due diligence on Global Solar Fund, even though the Suntech board specified precautions were necessary.
What's more, based on statements made by Romero in a United Kingdom court, Shi may have known or suspected fraud some five months before publicly disclosing to shareholders the situation, Seeborg wrote.
"Given Shi's close involvement in the bond transaction [and] his position in the company as CEO ... a strong inference can now be drawn that Shi acted with deliberate recklessness," the judge wrote.
Suntech was forced into Chinese bankruptcy court in 2013 and filed for Chapter 15 bankruptcy in Manhattan this February, according to news reports.
The defendants must respond to the amended complaint within 20 days.