FBI Starts Investigation into Delphi Books
Delphi, based in Troy, Mich., announced last week that it had incorrectly accounted for $237 million in cash payments made in 2000 to General Motors, its former parent company. The errors, Delphi said, resulted in overstatement of pretax income by about $61 million in 2001, the Detroit News reported.
The probe stems from an investigation launched by the Securities and Exchange Commission in August. The SEC made a criminal referral to the fraud division of the Justice Department.
"The FBI is involved in the investigation and we are coordinating with the Securities and Exchange Commission, Department of Justice and the United States postal inspectors," said Dawn Clenney, spokeswoman for the FBI's Detroit office.
Delphi spokeswoman Claudia Baucus said the company itself is not a target of the investigation, the newspaper reported.
Delphi has been conducting its own investigation of accounting problems reaching back to 1999. After the company's audit committee "expressed a loss of confidence” in Chief Financial Officer Alan Dawes, he resigned in early March. Delphi's chief accountant and controller, Paul Free, also left the company, and John Blahnik, vice president of treasury, mergers and acquisitions, was demoted.
Baucus said the company continues to review the conduct of certain lower- and mid-level executives, but added, "We have concluded our review of officers and believe that no further changes in the company's top management will be required as a result of our investigation."
Larry Dubin, a professor at the University of Detroit Mercy Law School, told the Detroit News that since the fall of Enron, the FBI has been much quicker to respond to referrals from the SEC and to investigate allegations of corporate wrongdoing. "The danger of major corporations suffering a financial loss as a result of criminal improprieties is now a top priority of the FBI," Dubin said.
The company expects to complete the restatement of its financial results by June 30.