In 2015, investors in Silver Wheaton Corporation ("Silver Wheaton" or the "Company") filed a securities fraud class action lawsuit against the Canadian company for concealing that the Company was facing a possible $207 million tax bill. Allegedly, Silver Wheaton failed to disclose the possibility of a tax reassessment by a Canada Revenue Agency ("CRA") audit. Silver Wheaton disclosed that the CRA has accused the Company of failing to pay taxes on $560 million in taxable income from 2005 to 2010 by wrongly attributing that income to its subsidiary in the Cayman Islands, which does not tax foreign corporate profits. Investors allege the Company and its officials knew or should have known about the potential tax liabilities, and illegally hid the Company's true financial information in order to inflate stock prices.
On February 6, 2017, Plaintiffs informed the U.S. District Court for the Central District of California that the Court's assistance was needed in order to obtain key evidence from Silver Wheaton's auditors and consultants in British Columbia, Deloitte LLP Canada ("Deloitte") and PricewaterhouseCoopers LLP Canada ("PwC"). Plaintiffs believe Deloitte and PwC possess crucial records that would support their allegations, including transfer pricing reports by PwC that Silver Wheaton claims will justify its tax position.
Because Canada and the U.S. are signatories to the 1970 Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters, a request for international judicial assistance cannot be denied without good cause. Therefore, the Plaintiffs are asking the Court to issue a letter to British Columbia's Ministry of Justice under the authority of that Hague treaty.
The investors argue that the evidence will provide a full picture of fraud by revealing Silver Wheaton's contingent tax liability disclosures, tax recognition practices, the government investigations of the Company, and its internal audits and controls to Deloitte.
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Kauri, Vidya. "Silver Co. Investors Seek Canada's Help In Fraud Suit," Law360. Last modified on February 8, 2017.