Deloitte Agrees to Pay $38 Million to Ex-Delphi Investors
Dec. 31, 2007 (Associated Press) DETROIT - The accounting company Deloitte & Touche has agreed to pay $38.25 million as part of a $325 million settlement of investor claims of misconduct by Delphi Corp. and those that oversaw its finances, it was announced Thursday.
Troy-based Delphi is the nation's largest auto parts supplier. It filed for bankruptcy protection in 2005, acknowledging that hundreds of millions of dollars in earnings that it had claimed since General Motors Corp. spun it off in 1999 were invalid.
A U.S. Securities and Exchange Commission investigation found that Delphi manipulated its earnings from 2000 to 2004, using several illegal schemes to boost its earnings, including the concealment of a $237 million transaction in 2000 with GM involving warranty costs.
Deloitte & Touche, now part of the privately held Deloitte Touche Tohmatsu, served as Delphi's outside accountant.
The agreement requires approval by Detroit U.S. District Judge Gerald Rosen and completes a $325 million settlement of investor claims over the accounting issue, lawyers for the investors said. Delphi agreed to pay about $205 million, with Delphi's insurers and banks paying the rest.
"It's about holding the gatekeepers accountable," said attorney Stuart Grant of Grant & Eisenhofer, one of four law firms representing public employee pension funds and other Delphi investors in the class action suit. "We're forcing the accountants ... to say, 'I am my brother's keeper.'"
The Associated Press left telephone and e-mail requests after business hours Thursday seeking comment from Deloitte & Touche.
In November, the U.S. Justice Department said it decided not to file criminal charges against nine former Delphi officials involving allegations of accounting fraud.
On Dec. 7, a federal bankruptcy judge gave Delphi permission to start soliciting votes for its plan to exit Chapter 11 bankruptcy protection.
The plan would eliminate 27,000 of 33,000 union jobs and would sell or close 21 factories in the U.S. and Mexico. The hedge fund Appaloosa Management LP and five other investors would inject up to $2.55 billion into Delphi in exchange for shares in the new company.
A court hearing on the plan is expected next month.
Delphi lost $1.2 billion on revenue of $6.2 billion in the third quarter of 2007.
Deloitte Touche Tohmatsu forecast $23 billion in revenue for its 2007 fiscal year.