SEC investigation faults Dana's financial reports
9/12/2009The U.S. Securities and Exchange Commission issued an order yesterday that found the Toledo area's largest corporation filed "materially false and misleading periodic" financial reports in 2004 and 2005.
The regulatory agency called the filings "fraud" and cited several violations of its securities rules, but it imposed no fines or penalties on Dana Holding Corp.
The Fortune 500 auto parts maker moved its headquarters this month from Toledo to Maumee.
The commission's order, which Dana agreed to, closes the four-year investigation with the company agreeing to abide by federal securities laws.
The problems stemmed from overstated revenues and other accounting miscues in 2004 and 2005 in Dana's commercial vehicle division. The SEC order said Dana employees in the unit "engaged in a fraudulent scheme with former Dana … employees … to inflate [the division's] financial results."
As a result, the SEC said, Dana misstated income, improperly recognized revenue when some expenses were reported, and "recorded other improper accounting entries."
Because of "the fraud," the SEC said, Dana overstated its profits before taxes.
When company executives discovered the accounting problems in late 2005, they restated the earnings for 2004 and 2005, cutting previously reported profits of $227 million by $43 million. The SEC order yesterday said there were accounting errors amounting to $56.4 million.
The order also outlined a number of problems with Dana's internal accounting controls during 2004 and 2005, but the agency accepted the changes subsequently made by the company.
The company announced in the fall of 2005 that it was investigating accounting problems and revealed that the SEC was investigating in February, 2006. Initially the firm said it might need to restate its earnings for part of 2005, but later broadened that to include 2004, the first half of 2005, and parts of earlier years.
Dana, in late 2005, replaced the head of its commercial vehicle unit and made other changes in terms of how accountants in that division reported to corporate officers.