phi's fraud settlement OK'd
Friday, December 01, 2006
Delphi's fraud settlement OK'd
Judge gives approval to agreement with auto parts supplier, former company executives.
David Shepardson / Detroit News Washington Bureau
NEW YORK -- A federal bankruptcy judge on Thursday approved agreements to settle accounting fraud charges against bankrupt auto parts supplier Delphi Corp. and six individuals, including the company's former chief financial officer.
U.S. Bankruptcy Judge Robert Drain said the settlement, which didn't require Delphi to pay any fine, was "fair and equitable and in the best interest" of the Troy-based supplier.
Under its agreement, Delphi is subject to contempt charges if it violates its decree with the U.S. Securities and Exchange Commission through 2010. The settlement may also require the company to submit to more stringent accounting reporting procedures than other companies, said Delphi bankruptcy lawyer Jack Butler.
Drain also ruled that former Delphi executives accused of wrongdoing by the SEC will get at least some of their mounting legal bills paid by Delphi insurance funds, which could also be used to settle lawsuits brought by shareholders and retirees because of the accounting issues.
Drain declined to order Delphi to directly pay legal bills for former executives, saying that is up to the supplier, but he capped the amount the executives can initially seek at $5 million.
"We're pleased with the judge's ruling," said Tom Cranmer, a lawyer for Delphi's former treasurer and senior vice president John Blahnik, who is among those charged by the SEC.
Separately, Drain delayed until February a decision on whether to approve nearly $100 million in legal, accounting and consulting fees and expenses racked up by Delphi in the first eight months since its October 2005 bankruptcy filing.
According to court records, the company's total fees through Sept. 30 are at least $114 million.
Execs named in SEC suit
Blahnik, former Delphi CEO JT Battenberg III, former Chief Financial Officer Alan Dawes and six other former Delphi executives were named in an Oct. 30 civil suit by the SEC.
They were accused of taking part in widespread accounting fraud that drastically overestimated the company's cash flow and income, especially in 2000 and 2001.
Also named were four other individuals, including three from EDS Corp., which had contracts with Delphi.
Six of the 13 people charged, including Dawes, settled and agreed to pay fines and costs totaling $1.4 million. Six former Delphi executives have not settled. The SEC will likely formally serve those executives with court papers this month.
Delphi also faces a number of shareholder and retiree lawsuits.
Lawyers for Delphi, former parent General Motors Corp. and Delphi's unions, including the United Auto Workers, met behind closed doors with Drain Thursday to update him on the status of the company's union contracts and other issues.
Delphi wants to void its labor contracts and impose concessions to help cut costs.
"We're continuing to make progress," Butler said.
Delphi shrank its losses dramatically in October as it improved its balance sheet.
According to its most recent monthly report, filed Thursday in U.S. Bankruptcy Court, Delphi lost $82 million in October, down from $673 million in September. The company has lost $4.4 billion so far this year.
Delphi hopes to emerge from bankruptcy next year after it sheds 21 of its 29 plants and more than 20,000 workers.
You can reach David Shepardson at (202) 662-8735 or dshepardson@detnews.com
© Copyright 2006 The Detroit News. All rights reserved.
Delphi's fraud settlement OK'd
Judge gives approval to agreement with auto parts supplier, former company executives.
David Shepardson / Detroit News Washington Bureau
NEW YORK -- A federal bankruptcy judge on Thursday approved agreements to settle accounting fraud charges against bankrupt auto parts supplier Delphi Corp. and six individuals, including the company's former chief financial officer.
U.S. Bankruptcy Judge Robert Drain said the settlement, which didn't require Delphi to pay any fine, was "fair and equitable and in the best interest" of the Troy-based supplier.
Under its agreement, Delphi is subject to contempt charges if it violates its decree with the U.S. Securities and Exchange Commission through 2010. The settlement may also require the company to submit to more stringent accounting reporting procedures than other companies, said Delphi bankruptcy lawyer Jack Butler.
Drain also ruled that former Delphi executives accused of wrongdoing by the SEC will get at least some of their mounting legal bills paid by Delphi insurance funds, which could also be used to settle lawsuits brought by shareholders and retirees because of the accounting issues.
Drain declined to order Delphi to directly pay legal bills for former executives, saying that is up to the supplier, but he capped the amount the executives can initially seek at $5 million.
"We're pleased with the judge's ruling," said Tom Cranmer, a lawyer for Delphi's former treasurer and senior vice president John Blahnik, who is among those charged by the SEC.
Separately, Drain delayed until February a decision on whether to approve nearly $100 million in legal, accounting and consulting fees and expenses racked up by Delphi in the first eight months since its October 2005 bankruptcy filing.
According to court records, the company's total fees through Sept. 30 are at least $114 million.
Execs named in SEC suit
Blahnik, former Delphi CEO JT Battenberg III, former Chief Financial Officer Alan Dawes and six other former Delphi executives were named in an Oct. 30 civil suit by the SEC.
They were accused of taking part in widespread accounting fraud that drastically overestimated the company's cash flow and income, especially in 2000 and 2001.
Also named were four other individuals, including three from EDS Corp., which had contracts with Delphi.
Six of the 13 people charged, including Dawes, settled and agreed to pay fines and costs totaling $1.4 million. Six former Delphi executives have not settled. The SEC will likely formally serve those executives with court papers this month.
Delphi also faces a number of shareholder and retiree lawsuits.
Lawyers for Delphi, former parent General Motors Corp. and Delphi's unions, including the United Auto Workers, met behind closed doors with Drain Thursday to update him on the status of the company's union contracts and other issues.
Delphi wants to void its labor contracts and impose concessions to help cut costs.
"We're continuing to make progress," Butler said.
Delphi shrank its losses dramatically in October as it improved its balance sheet.
According to its most recent monthly report, filed Thursday in U.S. Bankruptcy Court, Delphi lost $82 million in October, down from $673 million in September. The company has lost $4.4 billion so far this year.
Delphi hopes to emerge from bankruptcy next year after it sheds 21 of its 29 plants and more than 20,000 workers.
You can reach David Shepardson at (202) 662-8735 or dshepardson@detnews.com
© Copyright 2006 The Detroit News. All rights reserved.
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