KPMG Issues Apology Statement Regarding Wahaha Case

HANGZHOU, China -

On June 27, 2009, a statement was issued by KPMG Huazhen and its Guangzhou branch regarding a public apology to Suqian Wahaha Beverage Co.Ltd. and two other companies. The statement reads, “As ruled by the Intermediate People’s Court of Suqian City and the Higher People’s Court of Jiangsu province, China, the asset-takeover letter sent by KPMG Huazhen’s Guangzhou branch to Suqian Wahaha Beverage Co.Ltd., Suqian Wahaha Hengfeng Food Co.Ltd. and Suqian Wahaha Hengfeng Beverage Co.Ltd. on 16 November 2007 was a violation of China’s laws and constituted an infringement of Wahaha’s rights, KPMG Huazhen apologizes to the above three companies for the action.”

KPMG lodges appeal while apologizing

Though KPMG published a public apology in the International Business Daily on 27 June 2009, it issued on the same day a statement concerning its appeal against the decisions to the Supreme People’s Court of China on another page of the same newspaper. Commenting on this, Suqian Wahaha remarked that “Suqian Wahaha respects KPMG’s right to appeal pursuant to China’s law, and Suqian Wahaha will undoubtedly respond in accordance with the law if KPMG lodges such an appeal.”

Suqian Wahaha added that, as apologizing for the infringement is an obligation to be fulfilled in accordance with the verdict, which is enforced under Chinese laws, KPMG should by no means reject the fulfillment of that obligation. According to Suqian Wahaha, KPMG’s public appeal statement made in conjunction with its apology was a counteraction against the legal obligation named by the judicial writs of the two courts, hence offsetting the legal sense of apologizing as a way to assume civil responsibilities caused by such an infringement. Pledging to retain its right to require KPMG to truly perform the obligation, Suqian Wahaha called for responsible Chinese authorities to intensify their supervision over and crackdown on violations of China’s laws by foreign intermediaries operating in China.

Chinese lawyers call for intensified supervision over foreign institutions

This is not the first law offence by KPMG. As early as 2004, the U.S. Department of Justice launched an investigation concerning KPMG’s tax-shelter services between 1996 and 2002 following a survey of accounting firms, banks and taxpayers. The investigation directly led to the resignation of Richard Rosenthal, former chief administrative officer and chief financial officer of KPMG. KPMG announced immediately that it would take responsibilities for illegal tax-shelter services it offered during the period and will improve its professional conduct by issuing a public apology.

This time, however, KPMG announced its intention to appeal to China’s Supreme People’s Court immediately following its apology to a Chinese company. “This behavior is a provocation against China’s judicial dignity and by no means real fulfillment of its obligation,” Wahaha noted.

“As an accounting firm operating in China, KPMG must abide by China’s laws and do business in accordance with the laws. In addition, we hope responsible authorities will intensify their supervision over and crackdown on law violations by foreign intermediaries operating in China,” said Zhejiang T&C Law Firm lawyers Wang Lixin and Ye Zhijian, who are familiar with the lawsuit.

More reports on the Wahaha and KPMG lawsuit can be found at www.prnasia.com/pr/09/06/09415511-1.html

Source: Wahaha Group

Baoxiu Ye at +86-10-8457-7630 or bx.ye2009 at gmail.com