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O'Melveny's Kilduff Quoted in ABA JournalSeptember 27, 2011 O'Melveny & Myers Securities Litigation Practice chair and partner Jeff Kilduff is quoted in the October 1, 2011 ABA Journal article "Red-Flagging China: Regulators Eye Chinese Companies Using Reverse Mergers to Enter US." The article discusses how the increase in Chinese reverse mergers has triggered a spate of litigation. Last spring, O’Melveny assembled a group of securities litigators to handle reverse merger cases, says Kilduff, a partner in the firm’s Washington, DC office. “It became clear to us that this issue would have some legs. This represents a new area of litigation that the plaintiffs bar —including some big-name firms—is excited about.”
The firm’s task force has also taken on an advisory role with respect to investment banks that often help structure reverse merger deals. “We advise them about enhancing the due diligence process,” Kilduff says, “and counsel them to look at a company’s physical plant, its production volume, the status of its auditors and confirm the number of stores.”
Kilduff adds that while we haven’t seen the end of the reverse mergers litigation yet, this is not likely to match the continuous wave of securities suits akin to options backdating or financial crisis securities cases—for one important reason. “Many of these Chinese companies are not well-capitalized and not well-insured. So even if a plaintiff got a judgment, the likelihood of recovery is slim.”
Plus, he adds, securities litigation against foreign companies is exorbitantly expensive. “You have costs associated with international discovery, flying people to China, translating documents. Plaintiffs have to ask how much they want to spend chasing the company.”
Kilduff resides in O'Melveny's Washington, DC office.