Thursday, 7 April 2016
Ustian slammed by SEC in EGR cover-up
The US Securities and Exchange Commission has said Navistar International Corporation misled investors about the environmental compliance of its exhaust gas recirculation, or EGR, method of reducing air pollution from its trucks.In particular, the SEC noted that former Navistar chief executive officer Daniel Ustian has been charged by the agency in a federal court with “misleading investors and with aiding and abetting violations" of clean air laws.
In its statement, the SEC noted that Ustian placed a gagging order on company workers to prevent them from informing government officials about the EGR project, which it is reported cost the company an estimated $700 million.
Navistar abandoned its EGR programme in 2012 and, after Ustian left the company and with a new leader at the helm, not only began using selective catalytic reduction (SCR), the same emissions reduction system other OEMs use, but in a face-saving climb-down, negotiated a deal with Cummins Inc. permitting the Lisle, Illinois truck maker to use the Columbus, Indiana OEM’s SCR-based engines in some of its products. The move formed the basis of Navistar's turn-around programme as it could once again start selling trucks which otherwise were doomed.
The securities regulatory agency statement said Navistar and former boss, Ustian “failed to fully disclose the company’s difficulties obtaining Environmental Protection Agency certification of a truck engine able to meet stricter EPA Clean Air Act standards.”
David Glockner, director of the SEC’s Chicago Regional Office, is reported to have said, “We allege that in 2011 and 2012, the EPA repeatedly raised serious concerns with Navistar about its applications to certify an engine using EGR technology and that top Navistar officials knew the company had not succeeded in developing a commercially viable engine that would meet EPA standards. Navistar and its then-CEO misled investors about these difficulties in numerous SEC filings, press releases and public conference calls, and today we seek to hold them accountable for that misconduct.”
The federal regulatory agency said Navistar had agreed to pay $7.5 million to settle the SEC complaint. And indeed it is a very small price for Navistar to pay in order to secure closure of a nagging and embarrassing wound to its pride.
"We believe that it was time to put this matter behind us and that this settlement was in the best interests of Navistar and its stockholders. Settling this matter will avoid the expense and distraction of a potential dispute with the SEC and allow us to continue our focus on building and sustaining momentum on behalf of our shareholders," Navistar told Transport Topics this week.