Deloitte US has agreed to pay $38.2 million to settle claims relating to alleged accounting improprieties at its former audit client, auto parts manufacturer Delphi.
On 30 June 2005, Delphi was forced to restate its financial results for fiscal years dating back to 1999. In doing so, it reversed hundreds of millions of dollars in reported earnings during those periods, according to Grant & Eisenhofer, the co-lead counsel to a group of plaintiffs who represent the investors who acquired Delphi securities between 7 March 2000 and 3 March 2005.
In a statement about the Delphi settlement, Deloitte US said it is “pleased that it has been able to resolve the securities class action brought by investors in Delphi Corporation. Although it has strong defences to these claims, Deloitte concluded that it was in the best interests of the firm and its clients to settle this matter now rather than face the burden, expense and uncertainty of continued litigation.”
Grant & Eisenhofer managing partner Stuart Grant told IAB the plaintiffs are thrilled with the settlement. “This was a tremendous result,” he said. “The accounting industry is certainly starting to change its tone. I think more and more they are understanding that they are the gatekeepers and they are going to be held responsible, particularly if they actually have the information of the wrongdoing. A lot of times the accounting firms say ‘well gee, we didn’t know, we couldn’t have known’ and the truth is they might have known and they should have known. But this wasn’t either of those, [Deloitte] did know and they didn’t do anything about it.”
The shareholder payment from Deloitte follows an earlier commitment by Delphi to settle claims worth more than $205 million. Additional payments from Delphi’s insurance carriers and former banks bring the total settlement to more than $325 million, Grant & Eisenhofer said.
The settlements are awaiting approval from Gerald Rosen, the federal judge in the Eastern District of Michigan who is presiding over the case.