UPDATE: Navistar Reaches Tentative Settlement Over 2002-05 Financial Results
October 19 2009 - 10:12PM
Dow Jones News
Navistar International Corp. (NAV) said Monday Chairman and
Chief Executive Daniel Ustian will return part of his 2004 bonus
and several former employees are expected to pay fines as part of a
tentative settlement to the U.S. Securities and Exchange
Commission's probe of the truck and engine maker's accounting
practices.
The Illinois company, however, will not have to admit any
wrongdoing as part of the settlement, which also requires the
agency's approval. Ustian received a $2 million bonus for 2004. The
company did not disclose how much of that bonus will be returned
and did not identify the names of former Navistar employees who
face fines.
"This settlement will enable our company to put this matter
behind us," said Ustian in a written statement.
The investigation, which has lasted more than three years,
resulted in the company restating financial results for 2002
through 2005 to correct accounting errors. Navistar recorded nearly
$2 billion in restatement changes.
During the lengthy restatement process, Navistar was unable to
report financial results for 2006 and 2007, causing the company to
be delisted for more than a year from the New York Stock Exchange.
Navistar also was bounced from the Standard & Poor's 500 Index.
The company's shares traded over the counter during its absence
from the exchange.
The SEC cited Navistar for a range of accounting procedural
errors and irregularities, including timing issues related to the
booking of revenue. The company acknowledged that most of the
errors stemmed from its employees' lack of knowledge of more
stringent SEC reporting regulations adopted in the aftermath of
corporate accounting scandals earlier this decade.
The company also admitted that some of the smaller, but in some
cases material, adjustments were due to "instances of intentional
misconduct." Navistar said most people involved in misconduct are
no longer with the company.
Navistar complained bitterly that its longtime auditor Deloitte
& Touche endorsed many of the company's faulty reporting
procedures.
In August, the Public Company Accounting Oversight Board, a
federal agency, fined a former Deloitte partner $75,000 for
allegedly helping Navistar avoid restating the company's 2003
financial results when $19.7 million worth of errors were
discovered in the company's financing unit that would have lowered
Navistar's earnings. The agency earlier fined another Deloitte
partner $25,000 for signing off on the 2003 financial results.
Deloitte was not cited as part of the board's proceedings, but
Navistar has dropped the firm as its as its auditor. General
Counsel Steven Covey said Monday that the company "has invested
heavily in systems and personnel to ensure that events that led to
the restatement will not occur in the future."
Navistar's shares closed Monday at $39.09 and were inactive
after hours.
-By Bob Tita, Dow Jones Newswires; 312-750-4129;
robert.tita@dowjones.com
(Kathy Shwiff contributed to this report)