Three law firms are bringing a $650-million class action suit against KPMG for its role as auditor for Poseidon Concepts Corp.
The suit seeks restitution for investors who bought stock in the company before Feb. 14, 2013.
“Canadian investors rely on gatekeepers—including auditors—to review and opine on the finances of Canadian companies in exchange for substantial fees. When reviews and audits fail to uncover reporting issues, the financial impact on investors can be devastating,” says Dimitri Lascaris, a partner with Siskinds LLP. The other two firms involved are Siskinds Desmeules and JSS Barristers.
The suit alleges KPMG certified that it had conducted audits of Poseidon Concepts’ financial statements in accordance with auditing standards. Contrary to the picture painted in those financial statements, the firms allege that Poseidon was at all times in a precarious financial position. Following a series of revelations that Poseidon Concepts had massively overstated its revenues and assets, the price of its shares plummeted more than 95%. Poseidon Concepts has since filed for insolvency protection and its assets were sold for pennies on the dollar.
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Poseidon was listed on the TSX as PSN.