HQ Sustainable Maritime proposes shareholder settlement
Seattle Times business staff
HQ Sustainable Maritime Industries, Seattle’s entry in the parade of U.S.-listed Chinese companies accused of accounting fraud, has reached a proposed settlement with shareholders.
But don’t expect any big celebrations. The abused investors stand to collect about 32 cents per share for their stock, which traded close to $10 in mid-2009.
The company claimed to be doing a thriving business selling pond-raised tilapia from China. But in spring 2011 HQ’s most prominent director and auditing firm both resigned, citing questions about the company’s finances and lack of management cooperation in getting answers.
The stock became all but worthless, and the Securities and Exchange Commission revoked its registration earlier this year.
Court papers filed this month in the class-action lawsuit say the defendants (or more likely, their insurers) will provide a settlement fund of $2.75 million in cash. That’s about 45 cents per share, although the attorneys’ proposed fees of 25 percent and their expenses of about $100,000 will trim that recovery by about 13 cents per share, according to the filings.
The targets of the suit — HQ itself, top executives Norbert Sporns, Jean-Pierre Dallaire and Lillian Wang Li, and investment bankers Roth Capital Partners and Ladenburg Thalmann, which handled HQ’s stock offerings — admitted no wrongdoing in the settlement, as is usual in such cases.
Attorney Steven Toll of Cohen Milstein Sellers & Toll in Washington, D.C., who led the class-action case, calls the outcome “a pretty decent recovery” under the circumstances.
“The stock went from $9 to $3 before there was disclosure of the fraud,” so the shareholders couldn’t pin the earlier decline on the discovery of fishy accounting, Toll says.
Also, the company no longer files financial reports -- “we’re left with an entity that nobody knows very much about” -- and its assets, if any, are in China where a judgment could be tough to collect.
Plus, he says, litigating the case further ran the risk of eating into the insurance money available for a settlement, not to mention the possibility of losing in court.
Eligible shareholders — those who acquired the stock between May 11, 2009, and April 1, 2011 — won’t get official notice of the settlement until U.S. District Court Judge Robert Lasnik approves it. A payout could come in January, Toll says.
Sporns himself is still running at least part of HQ’s former business out of Burlington, selling the company’s Omojo-brand beauty aids online.
— Rami Grunbaum, Seattle Times deputy business editor
Community banks across the country are fleeing the oversight of the Securities and Exchange Commission, thanks to a new law. But so far, only one Washington bank has joined the exodus.
Skagit State Bancorp of Burlington, which owns Skagit State Bank, dropped its SEC registration this past summer. The bank employed a provision in the “Jumpstart Our Business Startups” (or JOBS) Act that lifts the threshold for mandatory SEC registration and reporting by bank-holding companies to 2,000 shareholders of record (from 500) and allows already-reporting companies with fewer than 1,200 shareholders (formerly 300) to deregister.
Nationally, 96 banks have voluntarily deregistered since the JOBS Act was enacted in April, according to research firm SNL Financial. That’s more than in the 20 previous quarters combined.
The 54-year-old bank has 12 branches in Skagit, Whatcom and northern Snohomish counties. It had assets of $747.1 million and $643.2 million in deposits as of June 30.
Carla Tucker, Skagit’s chief financial officer, said that because the company has so many shareholders it’s been reporting to the SEC since its formation in 2006 — even though its stock has never traded publicly.
“We think a broad stockholder base is a good thing,” CEO Cheryl Bishop said. “But we didn’t see that there were advantages to the reporting.”
Not only were the reporting requirements “pretty onerous” for a small company, Bishop said, they were expensive. In July, Skagit’s lawyers told the SEC that continuing to report through the end of 2012 would cost the company more than $90,000 — not to mention one-time costs of around $37,000 to upgrade the XBRL tagging of its electronic filings.
Skagit will continue to send quarterly and annual reports to its 770-plus shareholders, Bishop said. It also will, as required, report extensive financial information to the Federal Deposit Insurance Corp. via quarterly call reports, which are freely accessible to the public.
The only other Pacific Northwest bank to deregister under the JOBS Act, according to SNL Financial, is Idaho Independent Bank of Coeur d’Alene. That stock actually is quoted on the OTC Bulletin Board, under IIBK.
—Drew DeSilver, firstname.lastname@example.org
Retailers in Seattle’s eastern and northern suburbs had a pretty good second quarter — possibly at the expense of their brethren in the city itself.
New data from the state Revenue Department, comparing the second quarter of 2011 and last quarter, shows that retail trade grew 14.6 percent in Kirkland, 14.5 percent in unincorporated Snohomish County, 13.7 percent in Bellevue and 10.3 percent in Lynnwood.
Seattle retail trade, meanwhile, poked along at 4.8 percent, below the statewide average of 5.3 percent.
(Retail trade is a subset of taxable retail sales, which the Revenue Department has a certain vested interest in tracking. It includes sales at retail stores but excludes other taxable sales, such as those in the service and construction sectors.)
Among the state’s other large retail hubs, Tacoma and Spokane trade rose 4 percent, Bellingham was up 6.2 percent, Renton 6.4 percent and Everett 4.5 percent.
Within King County, little Hunts Point chalked up the biggest year-over-gain in retail trade: it more than doubled, to $230,622.
The biggest decline was in even tinier Beaux Arts Village, where retail trade fell by over a million dollars, or 75.7 percent, to $330,683.
— Drew DeSilver
Seattle may have lost its biggest banking name when WaMu went under, but the region still has plenty of places to cash a check (remember those?) or pick up some $2 bills for Junior’s birthday.
Seattle is among just a handful of metro areas to add bank branches this year — a whopping five, for a total of 939, according to analysis of federal deposit and branch data by research firm SNL Financial.
That was the seventh-biggest branch gain among all metro areas, SNL found — not surprising, given the long-term trend of banks shutting branches and customers moving (or being moved) to online banking.
Most of the urban areas that are gaining branches are in the West and South, where population growth is strongest; conversely, most of the cities losing branches are in the East and Midwest.
Total Seattle-area bank deposits grew 5.7 percent, to $74.3 billion from $70.3 billion last year, according to the SNL analysis.
— Drew DeSilver
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