Deloitte Settles Delphi For A Pittance
As settlements go, this is relatively minor. However it is another in a long line of settlements rather than trials for Deloitte, whose spokesperson, the hardworking Deb Harrington, always says:
…the company had a strong legal case but “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.”
Delphi , as you may remember, is one of the Tier 1 automotive suppliers to GM and a close relation of GM, another company with ongoing issues related to poor internal controls. It seems the apples don’t fall far from the trees and poor business practices, bad management and outright fraud were a part of how these companies “made money,” if you can ever believe their numbers.
Hey Big 4 (and BDO, GT and RSM): How about relieving the uncertainty for your employees, clients and investors and let us know how much you’ve got reserved for pending litigation and how you’re coming up with that number?
Deloitte agrees to pay $38 million to ex-Delphi investors
The accounting company Deloitte & Touche has agreed to pay $38.25 million (€26.3 million) as part of a $325 million (€223.9 million) settlement of investor claims of misconduct by Delphi Corp. — the largest auto parts supplier in the U.S. — and those that oversaw its finances.
Delphi filed for bankruptcy protection in 2005, acknowledging that hundreds of millions of dollars in earnings that it had claimed since General Motors Corp. spun it off in 1999 were invalid. A U.S. Securities and Exchange Commission investigation found that Delphi manipulated its earnings from 2000 to 2004, using several illegal schemes to boost its earnings, including the concealment of a $237 million transaction in 2000 with GM involving warranty costs.
Deloitte & Touche, now part of the privately held Deloitte Touche Tohmatsu, served as Delphi’s outside accountant.
“It’s about holding the gatekeepers accountable,” said attorney Stuart Grant of Grant & Eisenhofer, one of four law firms representing public employee pension funds and other Delphi investors in the class action suit.
One of the major issues the Accounting Industry in general, and the Big 4 in particular, faces is the hurdle of public knowledge. It seems to me that the cases, frauds, and settlements are never as clear cut as everyone tries to make them out to be.
I believe that frauds like this are a double edged sword when it comes to their public discussion: you want everyone to know it happened, but how much do you really want to explain it? Aren’t you opening the door to copy cat crimes with slight variations if you pour out every detail? And aren’t the firm’s wiping thier collective ass with the public’s trust if they say “let us handle it, it is too complex to explain”?
In that way, you always wind up making the firms look like green eyed monsters trying their damndest to keep issues under wraps and investors out of the loop, when it may in fact be the opposite.
And I further question the correctness of that article based on their explaination of Deloitte & Touche “now being part of closely held DTT”. It was always an affliate, but it not owned by DTT. This comment again demonstrates the fine line you walk in trying to explain to the public how a Swiss Verein works – do you really want to waste four paragraphs of legalese they may not understand anyway?