KPMG Huazhen accounting firm lost its lawsuit against three Suqian Wahaha subsidiaries on Thursday. However, KPMG vows appeal to higher court soon.

Suqian People’s Court ordered KPMG and its Guangzhou Branch to stop its illegal behavior and to compensate 300,000 yuan to the three Suqian Wahaha subsidiaries.

KPMG, one of "big four" accounting firms, has violated China’s judicial sovereignty by assisting Danone Asia Pte Ltd and its subsidiaries in its forcible takeover of the foreign shareholder of non-joint ventures of Wahaha and sending BVI and Samoa court orders to the non-joint ventures and banks operating in China. Any foreign institution or individual is not allowed to deliver documents and conduct investigations in China without permission from relevant Chinese oversight authorities, in accordance with applicable Chinese laws. For this reason, Suqian, Jiangsu province-based Wahaha Hengfeng Food Co., Ltd, one of the non-joint ventures, brought an accusation against KPMG at Suqian Intermediate People's Court, asking for compensation from KPMG.

In November 2007, Danone and KPMG jointly brought the foreign shareholder of non-joint ventures of Wahaha (a BVI company) and relevant directors into court at British Virgin Islands, applying for appointment of KPMG as the receiver. One month later, Danone proceeded against the parent of the BVI company in Samoa, again applying for appointment of KPMG as the receiver. Danone alleged that the non-joint ventures impaired its interests, while Wahaha claimed the ventures have nothing to do with Danone.

Wahaha Hengfeng Food sent a petition to the court, accusing KPMG of violating Chinese laws and affecting its normal production and operation, for which the company asked for compensation and a public apology from the accounting firm.

(China.org.cn December 12, 2008)