Lawyers for Pharmally International Holding Co yesterday filed lawsuits against two Deloitte & Touche Taiwan auditors for breach of trust and submitting false financial reports.
Pharmally executives are being probed over alleged securities fraud totaling about NT$1.5 billion (US$50.82 million).
Authorities last week issued an international warrant for Pharmally chairman Huang Wen-lai (黃文烈), also known as Tony Huang, over an alleged illegal transfer of NT$700 million into his personal bank accounts.
Investigators accused Huang of colluding with Chinese businesspeople to falsify accounts and financial statements in one of the largest securities fraud cases in the past few years involving a Taiwan Stock Exchange (TWSE)-listed firm.
Prosecutors on Thursday last week conducted raids and questioned 14 people, including the two auditors, Benjamin Shih (施景彬) and Allen Chiang (江明南), who were in charge of Pharmally’s reports.
Shih and Chiang were released on bail of NT$300,000 each.
Phamally lawyers yesterday said that Shih, a certified public accountant, was chief operating officer of Deloitte & Touche Taiwan and headed its auditing section, handling Pharmally’s reports since 2011, while Chiang started work on Pharmally finances in 2015.
The lawyers said that Shih and Chiang contravened the Securities and Exchange Act (證券交易法) by “making false statements in a financial report” as a managerial officer or accounting officer who signs or seals a report.
The pair violated the rights of Pharmally’s shareholders, causing them to incur financial losses, the lawyers said, adding that they would press charges of aggravated breach of trust, which, if proved would add to their punishment.
Shih and Chiang billed Pharmally more than NT$9 million per year, a much higher rate than other accounting firms, the lawyers said, citing a NT$6 million bill from E.Sun Financial Holding.
The TWSE on Tuesday last week suspended trading on Pharmally shares.
Pharmally has production sites in China’s Anhui Province and offices in several Chinese cities.
Its founding Chaoyang Chemical Plant in China in 1997 was restructured as Anhui Chaoyang Pharmaceutical Co.
Huang, a native of Miaoli County, bought Anhui Chaoyang and set up Pharmally in China in 2013.
Pharmally gained approval to list on the TWSE in March 2015 under the KY stock category for foreign-based firms.
The lawyers said that Shih and Chiang handled other KY stocks, so they were familiar with the auditing processes, including checking finances, assets, liquidity, debts and other details.
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