The Securities and Exchange Commission on Monday filed financial fraud charges in federal court in Detroit against Troy, Michigan-based auto parts supplier Delphi Corporation. Later in the day, Delphi said that the SEC had commenced and simultaneously settled a lawsuit alleging violations of federal securities laws.
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In its complaint, the commission charged Delphi with fraud between 2000 and 2004 and also charged 13 individuals – including former CEO JT Battenberg – for their alleged roles.
The complaint charged seven former Delphi employees and two others with participating in or aiding and abetting Delphi’s fraud.
The former Delphi staffers included Battenberg, the former chief executive officer and chairman of Delphi; former chief financial officer lan Dawes; former controller and chief accounting officer Paul Free; former treasurer and senior vice president John Blahnik; former director of capital planning and pension analysis Milan Belans; former director of financial accounting and reporting Catherine Rozanski and former director of finance in Delphi’s information technology department Judith Kudla.
The others were Scot McDonald, who is employed by a Texas-based information technology company and formerly served as its manager of US GAAP consulting and reporting and BN Bahadur who, in the relevant period, was the founder, sole owner and principal of a Michigan-based private management consulting company.
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By GlobalDataThe complaint also charged four individuals with aiding and abetting Delphi’s reporting and books-and-records violations.
These were former Delphi assistant treasurer Atul Pasricha; former director of financial accounting and reporting Laura Marion; Stuart Doyle, a former client executive supporting the Texas IT company’s relationship with Delphi; and Kevin Curry, who held a similar role.
The commission alleged that, between 2000 and 2004, Delphi engaged in multiple schemes that resulted in it materially mis-stating its financial condition and operating results in filings with the commission, offering documents, press releases, and other documents and statements.
Fredric Firestone, an associate director in the SEC’s division of enforcement, said: “Despite engaging in widespread fraudulent conduct, Delphi took significant remedial steps and cooperated extensively with the commission’s investigation.
“The Commission considered Delphi’s remediation and cooperation, among other things, in deciding not to impose a penalty.”
In addition to settling with Delphi, the commission simultaneously settled with six individuals, who also neither admitted nor denied the commission’s allegations.
Dawes agreed to a five-year officer-and-director bar and to pay various penalties totalling $687,000.
Pasricha agreed to pay a penalty of $55,000.
In connection with the civil action, Bahadur agreed to pay a total of 569,257, Marion and Doyle each agreed to pay penalties of $40,000, and Curry agreed to pay a penalty of $25,000.
The SEC noted that each of the settlements is subject to court approval, and Delphi’s settlement is also subject to approval by the US Bankruptcy Court overseeing its bankruptcy.
In a statement, Delphi said: “The lawsuit and settlement relate to transactions that were the subject of a restatement by Delphi in June 2005.
“Under the agreement approved by the commission, Delphi agreed, without admitting or denying any wrongdoing, to be enjoined from future violations of the securities laws. The SEC did not impose civil monetary penalties against the supplier.
In a statement attributed to Delphi chairman and CEO Steve Miller, Delphi added: “We have cooperated fully with the commission’s investigation and will continue to do so. We are pleased to put the SEC investigation behind us and consider this settlement an important step in our transformation process.”
