Fiat Chrysler Is Fined $40 Million for Sales-Reporting Fraud
The automaker issued statements that misled investors by wrongly claiming a years-long streak of monthly gains.
(Bloomberg) -- Fiat Chrysler Automobiles NV agreed to pay a $40 million penalty related to years of sales reports the U.S. Securities and Exchange Commission said were fraudulent.
The Italian-American automaker issued statements that misled investors by wrongly claiming a years-long streak of monthly gains, the SEC said Friday. Fiat Chrysler inflated results by paying dealers to report fake sales. The company also maintained a database of actual-but-unreported figures that employees could tap into to falsely post continued growth, according to the regulator.
“New-vehicle sales figures provide investors insight into the demand for an automaker’s products, a key factor in assessing the company’s performance,” Antonia Chion, associate director in the SEC’s enforcement division, said in a statement. “This case underscores the need for companies to truthfully disclose their key performance indicators.”
Fiat Chrysler shares slumped as much as 0.9% to $12.86 as of 1 p.m. Friday in New York. The stock is down about 11% this year.
Dealer Suit
The fraudulent reporting first came to light in January 2016, when U.S. dealers alleged in a lawsuit that Fiat Chrysler had been offering retailers money to falsify sales. While the company settled that suit earlier this year, the allegations spurred the federal investigation. The automaker restated 5 1/2 years of sales results in July 2016 and said at the time that its counting methodology had been in place for decades.
“FCA US cooperated fully in the process to resolve this matter,” the automaker said in a statement. “The company has reviewed and refined its policies and procedures and is committed to maintaining strong controls regarding its sales reporting.”
Fiat Chrysler said the fine won’t materially impact its finances. The SEC announced the penalty three days after the U.S. Justice Department brought its first criminal charges related to allegations of diesel-emissions cheating at the carmaker. The company reached an $800 million civil settlement related to the issue in January.
Sales Chief
The scrutiny of Fiat Chrysler’s reporting swept up one of its most senior executives, U.S. sales chief Reid Bigland. He sued the company in June, alleging the automaker withheld his pay in retaliation for cooperating with the federal probe.
Fiat Chrysler has filed a motion to have Bigland’s lawsuit transferred to Delaware, which his lawyer said is an attempt to move the case out of state and eventually into private arbitration. The hearing on that motion, which Bigland is resisting, is scheduled for Oct. 3.
“My client has not been contacted recently by anybody at the SEC,” said Deborah Gordon, Bigland’s lawyer. “He’s been working very hard at FCA, his usual, practically 24/7 schedule. All credit to him for continuing to be a team player.”
--With assistance from Ben Bain.
To contact the reporter on this story: Gabrielle Coppola in New York at gcoppola@bloomberg.net
To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, Melinda Grenier
©2019 Bloomberg L.P.