VANCOUVER, B.C. (CN) - A researcher who worked on a report that caused a sharp decline in Silvercorp Metals' stock price claims in court that the Canadian mining company had him imprisoned in China, in "a campaign to silence its critics and place a chill on further independent reports and the researchers who contributed to them."
Kun Huang sued Vancouver-based Silvercorp Metals on Tuesday in British Columbia Supreme Court. They are the only parties to the lawsuit.
Huang says he was a researcher based in China who supplied information to Eos Holdings, which was published on Alfredlittle.com, which issues reports about public companies and is controlled by Eos' manager John Carnes.
Eos, according to the complaint, is an investment fund that sniffs out Chinese companies whose stock price is mismatched with their "true value," taking out short positions when it expects a firm's share price to drop.
The reports disclose whether their author takes a long or short position in the subject firm, but are issued anonymously to protect researchers who have been harassed and intimidated by targeted companies in the past, according to the complaint.
The report to which Huang contributed "raised a number of questions about the financial position of Silvercorp," the complaint states. It found that mining output of one of the firm's projects didn't square up with reports to Chinese authorities compared to reports to Canadian authorities, among other issues.
Days later, the company "engaged in an aggressive counter-offensive to silence its critics or its 'enemies,'" starting with a defamation suit against Alfredittle and Chinastockwatch in New York, but the case was dismissed, according to the complaint.
Silvercorp then "used its influence on public officials" to fund and support an investigation by the Public Security Bureau in Luoyang, China "to falsely imprison and then later knowingly bring baseless criminal charges against Mr. Huang," according to the lawsuit.
Huang claims that Silvercorp is one of Luoyang's "primary economic drivers and one of the largest taxpayers" with "significant influence on local officials" in the city.
Huang says he was falsely imprisoned for more than two and a half years, beginning in 2011. He was detained at Beijing airport and taken to Luoyang, where he was interrogated by police who he claims were in direct contact with Silvercorp during questioning.
Before being formally charged, Huang says, he "was held for months in extremely harsh and inhumane conditions."
In September 2013, he was convicted in a one-day, closed-door trial where Silvercorp lawyers acted "effectively" as prosecutors, Huang says.
"On July 18, 2014, Mr. Huang returned to Canada, bringing his roughly three year confinement in China, orchestrated by Silvercorp, to an end," the complaint states.
He claims he lost 40 pounds during the ordeal and suffered psychological and emotional distress in addition to irreparable harm to his professional reputation.
He seeks pecuniary, general, special, aggravated and punitive damages for false imprisonment, defamation, "pain, suffering, humiliation, embarrassment, loss of dignity, mental anguish, and harm to reputation."
Huang is represented by Howard Mickelson of Gudmundseth Mickelson in Vancouver.