Former Delphi Corp. CEO J.T. Battenberg III is facing a civil securities-fraud case filed by Securities and Exchange Commission. Nicholas Difazio, General Motors' former outside auditor testified that, in 2000, Delphi management withheld documents from its accounting firm that might have raised red flags about how the Company booked a $237 million payment to GM.
The SEC says the money was to compensate GM for faulty parts. However, Delphi avoid an earnings hit by improperly booking it mostly as employee-benefit expenses and pension.
SEC attorneys recently showed Difazio, now a Deloitte & Touche partner, an itemized list of faulty parts totaling $240 million that Delphi owed GM at the time.
SEC says Delphi's $237 million payment to GM was to cover bad parts, but Delphi listed $202 million as a payment for benefit obligations and pension.
Difazio said that he thought the accounting treatment was correct in 2000. In cross-examining Difazio, defense attorney tried to discredit SEC's arguments that Delphi's settlement with GM had little to do with employee-benefits payments or pension. [via autonews - sub. required]