v2.4.0.6

Note 15 - Contingencies | 6 Months Ended
--- | ---
Jun. 30, 2012
Legal Matters and Contingencies [Text Block] | Note 15 – Contingencies Acquisition of Winder On April 1, 2008, Deer International acquired 100% of the equity interest in Winder from 50HZ Electric Limited (“50HZ”). At that time Deer International was an offshore that enterprise controlled by some of the Company’s shareholders who are PRC residents. Certain of these shareholders also owned or controlled 50HZ , which made Winder an affiliated PRC company of such shareholders. In October 2008, such shareholders transferred their ownership interests in 50HZ to an unrelated third party, after which 50HZ was no longer a related party of the Company. The transaction was approved by the Economic Development Bureau of Yangjiang High-Tech Industry Development Zone (the “Yangjiang High-Tech Zone”). The acquisition of 100% of Winder’s equity interests by Deer International on April 1, 2008, was free of any consideration and conditions. Under applicable PRC tax rules, any transaction between related parties shall be priced on an arm’s length basis. The tax authority has the right to investigate any related party transaction and to make adjustment if it finds the price not on an arm’s length basis. The PRC tax authority would make adjustment by applying a deemed arm’s length price to the transaction. Given that 50HZ and Deer International had certain related parties at the time of the Winder acquisition, there is a possibility the consideration-free transfer may be challenged and investigated by the PRC tax authority. If the deemed arm’s length price determined by the PRC tax authority during such investigation is higher than the original cost that 50HZ paid to get 100% equity interest of Winder, such excess amount would be subject to additional PRC income tax. Although the Company believes 50HZ would be responsible for the possible PRC income tax, the Company understands it is common practice for PRC tax authority to enforce the tax collection on the entity at issue, which in this case would be Winder, and the Company may be required to pay the possible PRC income tax on behalf of 50HZ. According to the M&A Regulations, the acquisition of Winder might require the approval of Ministry of Commence People’s Republic of China (“MOFCOM”). As the interpretation and implementation of the M&A Regulations are unclear, if the approval of MOFCOM is required, the approval that 50HZ obtained from the Yangjiang High-Tech Zone may be deemed incomplete and the transferee, namely Deer International, may need to obtain further approval from MOFCOM. Pending Litigation On March 28, 2011, the Company filed suit in the Supreme Court of the State of New York, captioned Deer Consumer Products, Inc. v. Alfred Little, et al., Index No. 650823/2011, against a certain blogger, “Alfred Little,” a website SeekingAlpha.com (where some of the blogs appeared) and Does #1-10, who were phantom authors and distributors of negative false articles about the Company. The Company alleged that the defendants published false and defamatory statements as part of scheme to manipulate and depress the market for the Company’s common stock enabling defendants to realize unnatural profits on short positions they had taken. On August 29, 2011, the Company obtained a Court order allowing the Company to serve the summons and complaint upon anonymous defendant Alfred Little via email. The Company effected service on Alfred Little pursuant to that order. On September 29, 2011, Alfred Little filed motions to dismiss the complaint claiming lack of New York jurisdiction and for permission to appear anonymously as a party in the litigation. SeekingAlpha.com certified that it was neither involved in the authoring or revision of the allegedly defamatory statements and, as such, on August 31, 2011, the Court granted defendant SeekingAlpha.com’s motion to dismiss the Company’s claim against it. On September 29, 2011, the Company filed a notice of appeal of this decision. On May 21, 2012, the Company advised the Court that it had decided not to “perfect” the appeal. On January 27, 2012, the Court denied in part Alfred Little’s motion to dismiss the complaint for lack of personal jurisdiction and permitted the Company to conduct discovery on the issue of personal jurisdiction after a confidentiality agreement was reached between the parties. On February 17, 2012, the parties reached a confidentiality agreement and the Company then commenced discovery on the jurisdictional issue. On February 23, 2012, after an in camera review of the evidence presented by Alfred Little, the Court permitted Alfred Little to proceed anonymously until the Court decided the jurisdictional issue. On March 30, 2012, Alfred Little filed a second motion to dismiss all claims. This motion was rejected and denied by the Court on May 9, 2012. On this same date, the Court found Alfred Little to be in violation of discovery and compelled Alfred Little to comply under pain of sanctions. The Company informed the Court that there was more than one Alfred Little and that additional defamation attacks were taking place in explicit retaliation for the Company seeking assistance from the New York Court. The Court granted the Company the right to amend its complaint to plead the case against all individuals and entities acting in concert to publish and distribute the allegedly false statements about the Company. On May 10, 2012, the Court so ordered a subpoena for the in person deposition of Xiaofu (Jeff) Huang at New York Supreme Court to take place on May 16, 2012. Xiaofu (Jeff) Huang failed to appear on May 16, prompting the Court to inform the parties that it planned to vacate the February 23, 2012 Order of Anonymity. The Court reasoned that Xiaofu (Jeff) Huang had information material as to whether Alfred Little should proceed anonymously, and, without such information, Alfred Little should not be allowed to proceed anonymously. The next day Jon Carnes claimed that he was Alfred Little. Carnes retained the same law firm as Alfred Little. On May 17, 2012, the Court vacated its February 23 Order of Anonymity on consent. All confidentiality protections were specifically lifted by an order dated May 21, 2012, which Order also unsealed all documents making them available to the public. The Company filed its amended complaint on June 6, 2012, naming the individuals and entities that were part of the group that the Company claims authored and distributed false statements about the Company. The Company is seeking: (1) $11 million dollars in compensatory and punitive damages against each defendant for its participation in the scheme as well as other damages, (2) an Order requiring the defendants to retract the false statements about the Company and (3) an Order forbidding the defendants from future false attacks on the Company. On June 22, 2012, the Court permitted the Company and Carnes to engage in supplemental briefing on the issue of whether the jurisdictional discovery of Carnes extends up to the filing date of the amended complaint. In its July 31, 2012 Order, the Court ruled that Jon Carnes and Alfred Little are one and the same and that the time limit for Carnes’s jurisdictional discovery ended at the filing of the original complaint, but that jurisdictional discovery as to all other defendants other than Jon Carnes may very well extend to June 6, 2012. On August 1, 2012, the Court granted service of the amended complaint upon defendant Andrew Wong via email. The Company effected service upon that defendant the same day. Thus far the Company has served five of the ten known defendants and has filed a motion to serve three more defendants without addresses: Joseph Ramelli, Xiaofu (Jeff) Huang, and International Financial Research & Analysis Group. Defendant EOS Holdings LLC has filed a motion to dismiss which the Company must file papers in opposition to by August 22, 2012. Defendant Simon Moore, also represented by the same law firm representing Carnes, has until August 17, 2012 to file its answer or motion. On April 29, 2011, a purported securities class action lawsuit on behalf of the purchasers of the Company’s common stock between March 31, 2009, and March 21, 2011, James Rose v. Deer Consumer Products, Inc. et al, was filed against the Company and certain of its current and former officers and directors in the United States District Court for the Central District of California. The court has not yet certified the class action status. The complaint alleges violations of Section 10(b) and Rule 10b-5 of the Exchange Act, as well as, in the case of the individual defendants, the Section 20(a) control person provisions of the Exchange Act. The factual assertions in the complaint, based expressly on the published statements at issue in the Alfred Little suit described above, consist primarily of allegations that the defendants made materially false or misleading public statements concerning the Company’s financial condition in 2010 and 2009. The complaint seeks unspecified damages and other relief relating to the purported inflation in the price of the Company’s common stock during the class period. A consolidated amended complaint was filed on September 6, 2011, with essentially the same allegations. The Company filed a motion to dismiss the lawsuit, which motion is fully briefed and has been taken under submission by the Court. The Company strongly denies the allegations in the complaint. The Company believes this lawsuit is frivolous and without merit and will contest it vigorously. The Company plans to pursue all legal remedies available to it if the complaint is not withdrawn in its entirety.

X
- Definition The entire disclosure for legal proceedings, legal contingencies, litigation, regulatory and environmental matters and other contingencies. + References No definition available. + Details
Name: | us-gaap_LegalMattersAndContingenciesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration