Tyne and Wear Pension Fund (TWPF) will share in a $62.5m (€50m) payout from Sociedad Quimica y Minera de Chile (SQM), a Chilean mining company, five years after launching a class action against the company for fraud.
Judge Edgardo Ramos of the district court for the Southern District of New York gave preliminary approval to a settlement between the parties last Friday.
The £11.4bn (€12bn) pension fund – which provides pensions for local government employees in the north-east region of the UK – was lead plaintiff in the class action, represented by its administering authority South Tyneside Council. SQM is one of the world’s largest producers and distributors of speciality fertilisers and industrial chemicals.
The case alleged that SQM had made materially false and misleading statements and failed to disclose that it made secret, illegal payments – primarily through its then CEO, Patricio Contesse – to electoral campaigns for Chilean politicians and political parties, as far back as 2009.
SQM was also accused of filing millions of dollars worth of fictitious tax receipts with Chilean authorities in order to conceal the payment of bribes, and producing financial statements which were materially false and misleading at all relevant times.
It was also alleged that, as a result of SQM’s bribery scheme and the defendant’s false statements, the price of SQM American Depositary Shares (ADSs) was artificially inflated between 30 Jun, 2010 and 18 March 2015, peaking at more than $66 a share in July 2011.
TWPF claimed it suffered losses of more than $4.4m on its shares during the period as a result of SQM’s securities violations.
“These extraordinary results would not have been possible a couple of decades ago”
Aelish Baig, partner with Robbins Geller Rudman & Dowd
Aelish Baig, partner with Robbins Geller Rudman & Dowd (RGRD), the lawyers acting for TWPF, said the case was uniquely challenging in that most of the evidence was in Chile. Documents and testimony were in Spanish, and Chilean law was implicated in certain respects, and even raised as a defence.
Baig said RGRD had deployed an extremely capable internal e-discovery team that allowed for electronic review of hundreds of thousands of documents. It put together a multilingual team, bringing in Chilean legal expertise as needed. In Chile, depositions are considered unlawful, so RGRD forced SQM to bring its witnesses to the US.
The pandemic also presented logistical challenges, she said.
But Baig observed: “SQM investors will recoup a sizeable portion of their losses. For investors in general, the case should provide some comfort that foreign corporations wishing to benefit from trading on the New York Stock Exchange can and will be held accountable for violations of US laws.”
She added that on multiple occasions in 2019 and 2020, UK-based pension funds had led shareholder litigation and achieved “extraordinary” outcomes.
She commented: “These extraordinary results would not have been possible a couple of decades ago. However, given technological advancements, we are now able to hold companies accountable for unlawful acts irrespective of whether they reside next door, across the pond, or on separate continents.”