Fiat Chrysler Automobiles has agreed to pay $40 million to settle charges by the U.S. Securities and Exchange Commission that it misled “investors about the number of new vehicles sold each month to customers in the United States” for several years ending in 2016.
The company “issued monthly press releases falsely reporting new vehicle sales and falsely touting a ‘streak’ of uninterrupted monthly year-over-year sales growth, when in fact, the growth streak had been broken in September 2013,” the SEC said, noting that the news releases were included in the company’s SEC filings.
The company, actually FCA US and its parent FCA, agreed to pay the $40 million civil penalty but did not admit or deny the SEC’s findings.
In a news release Friday, the SEC said the Italian-American automaker with its U.S. headquarters in Auburn Hills, north of Detroit, also “inflated new vehicle sales results by paying dealers to report fake vehicle sales and maintaining a database of actual but unreported sales.”
The database was often referred to as a “cookie jar,” the SEC said.
“In months when the growth streak would have ended or when FCA US fell short of other targets, FCA US dipped into the ‘cookie jar’ and reported old sales as if they had just occurred,” the SEC said.
The sales reporting case is also the subject of a whistleblower lawsuit filed by Reid Bigland, a 22-year company veteran who heads U.S. sales and the Ram truck brand for FCA. Bigland said the company had retaliated against him because he was cooperating with the government investigation into FCA’s sales reporting. Bigland claimed FCA withheld most of his 2018 compensation as punishment and intended to use it to pay fines.
The SEC said accurately reporting sales figures is important.
“New vehicle sales figures provide investors insight into the demand for an automaker’s products, a key factor in assessing the company’s performance,” said Antonia Chion, associate director in the SEC Division of Enforcement. “This case underscores the need for companies to truthfully disclose their key performance indicators.”
FCA released a statement noting its cooperation.
“FCA US cooperated fully in the process to resolve this matter. The company has reviewed and refined its policies and procedures and is committed to maintaining strong controls regarding its sales reporting. The settlement requires a payment of $40 million which will not have a material impact on the financial statements of the company,” the company said.
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The sales issue came to light in 2016. The Free Press reported at the time that FCA was under scrutiny by the Justice Department and the SEC and that its “impressive sales streak of 75 months of consecutive sales gains actually ended in September 2013.”
In his lawsuit, Bigland said he had inherited the sales reporting methodology, which had been in place since the late 1980s, and it was widely known, including by former CEO Sergio Marchionne, who died last year; and Chief Financial Officer Richard Palmer, from whom he had taken direction.
FCA announced in 2016 that it was revising its sales reporting practices, but the company also said that news media reports at the time “mistakenly suggested that potential inaccuracies in the monthly data somehow impact the integrity of FCA’s reported revenues in its financial statements.”
Contact Eric D. Lawrence: elawrence@freepress.com or (313) 223-4272. Follow him on Twitter: @_ericdlawrence.
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