Investment Bank Sues Morrison & Foerster Over Puda Coal Debacle
The defunct, fraud-addled Chinese company Puda Coal was disaster for its investors, and remains a major litigation headache for its bankers. Now the investment bank Macquarie Group wants the lawyers to share the blame.
March 30, 2015 at 12:08 PM
4 minute read
The defunct, fraud-addled Chinese company Puda Coal Inc. was disaster for its investors, and remains a major litigation headache for its bankers. Now Macquarie Group Ltd., which is in hot water for underwriting a fraudulent U.S. stock offering for Puda more than four years ago, wants the lawyers to share the blame.
Macquarie sued its former lawyers at Morrison & Foerster on Thursday in New York state court, accusing the firm of “egregious negligence” and legal malpractice for failing to sound the alarm about Puda. Lawyers in Morrison & Foerster's capital markets group counseled Macquarie in its role as lead underwriter for Puda's $108 million public offering in December 2010, with neither MoFo nor Macquarie noticing that Puda had virtually no assets at the time. A Pennsylvania short-seller first uncovered apparent fraud involing Puda's finances in 2011, sparking charges from U.S. regulators the following year.
The legal malpractice claims against Morrison & Foerster were first reported by The Wall Street Journal on Friday—the same day the U.S. Securities and Exchange Commission announced a $15 million settlement with Macquarie Capital (USA) Inc. over the Puda Coal offering. Macquarie is also facing a private securities class action over its role as Puda's underwriter in Manhattan federal court.
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