More trouble for embattled Delphi as it tries to stave off bankruptcy: Reuters reported that two US state pension funds and other large investors have sued the parts maker, alleging that executives made bogus deals with third-party vendors aimed at hiding the company’s financial problems.
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The lawsuit, whose lead plaintiffs include the Teachers’ Retirement System of Oklahoma and the Public Employees’ Retirement System of Mississippi, was filed in federal court in New York on Friday and seeks class-action status, the report said.
According to the news agency, the suit contends that Delphi concocted a “broad and complex scheme to lie about its financial results” after it was spun off from long-time parent General Motors in 1999 and faced competitive pressures.
The suit reportedly names the company, current and former directors including former CEO JT Battenberg, former chief financial officer Alan Dawes, outside auditor Deloitte & Touche and others as defendants.
Delphi spokesman Lindsey Williams declined to comment to Reuters on Wednesday, saying the company does not comment on pending litigation.
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By GlobalDataAccording to the suit, senior Delphi executives instructed subordinates to violate accounting rules overseeing how revenue and expenses should be recognised, Reuters said.
“The fraud could not have succeeded, or achieved the magnitude it did, without the direct participation of third parties who were all too willing to engage in sham transactions intended to falsify Delphi’s reported financial results,” the complaint reportedly said.
Reuters added that the lawsuit contends that, from 1999-2001, the company entered into a string of deals in which it purported to transfer assets to third parties in exchange for hundreds of millions of dollars, with an associated obligation to buy back the same assets.
“Rather than disclosing these transactions as the off-balance sheet financings that they actually were, Delphi falsely presented the proceeds of these loans as though they were the product of asset sales in the ordinary course of business,” the complaint said, according to Reuters.
