DETROIT -- Robert Rossiter and his top executives in some ways have operated Lear Corp. like a tightly run family business. Now the Securities and Exchange Commission is probing those family ties.
Last week the automotive interiors giant acknowledged that the SEC has asked for information about Lear's employment of family members and business transactions with relatives of top officers and directors.
In an amended proxy statement for 2002, Lear reveals that at least seven relatives of Rossiter worked for Lear or for companies that did business with Lear in 2002. Rossiter became CEO in 2000.
Lear announced the inquiry to show that it "has nothing to hide," said Mel Stephens, a spokesman for the Southfield, Mich., company.
|All in the family|
|11 relatives of senior Lear officials including Robert Rossiter, James Vandenberghe and Ken Way are on the company payroll.|
|P. VandenBoom||Brother-in-law of Vice Chairman James Vandenberghe||$161,344*|
|Spencer Gill||Son-in-law of director Roy Parrott||$122,457*|
|Robert Snyder||Brother-in-law of CEO Robert Rossiter||$114,336*|
|John Youvon||Brother-in-law of Paul Joseph Zimmer, president, seating systems division||$107,920|
|David Way||Son of director Ken Way||$103,169*|
|Richard Snyder||Brother-in-law of Rossiter||$100,680*|
|Michael Spalding||Brother of director David Spalding||$84,438|
|Noelle Gill||Daughter of Parrott||$82,789 *|
|Brian T. Rossiter||Son of Rossiter||$78,149|
|Steven DelGrosso||Brother of Douglas DelGrosso, president, International operations||$77,061|
|Sara Rossiter||Daughter of Rossiter||$62,562|
|Insider business transactions|
|Lear reported transactions with 5 companies that employ relatives of top Lear executives.|
|Revenue from Lear|
|William Zimmer is employed by Piston Automotive. He is the brother of Paul Joseph Zimmer, who is president of Lear Seating Systems division||$28 million|
|Thomas Zimmer is employed by Cornerstone Real Estate. He is the brother of Paul Zimmer||$74,441|
|Terrence Rossiter and Ray Green are employed by software supplier Analysts International. Rossiter is the brother of CEO Robert Rossiter. Green is the brother-in-law of Charles Fisher, a former Lear divisional president.||$5.2 million|
|Brian Rossiter represents Center Manufacturing and Sarnamotive/Blue Water. He is the brother of CEO Rossiter.||$2.9 million|
|Terrence Kittleson is employed by Trammell Crow Co. He is the brother-in-law of CEO Rossiter.||$2.5 million|
|Source: Lear 2002 proxy|
The SEC has not accused Lear of anything illegal or improper. An agency spokesman declined to comment on the investigation or to discuss any areas of potential wrongdoing.
According to the proxy, which was filed with the SEC in September, Lear paid $998,000 in salary and bonuses to 11 employees who are related to top executives and officers. The employees' compensation averaged almost $91,000 per person.
Lear also paid $38.7 million to vendors at which six family members of Lear top executives were employed.
For example, Lear paid more than $2 million to real estate management company Trammell Crow Co. Rossiter's brother-in-law, Terrence Kittleson, is executive vice president of the Dallas company.
The stock market barely noticed news of the SEC probe. Lear shares closed down 2 percent to $66.30 after Lear announced the probe on Tuesday, Jan. 20. The shares closed at $68.88 on Friday.
Employing family members or doing business with companies where families members work is not illegal or improper unless a company specifically prohibits it.
Says securities lawyer David Joswick of the Detroit firm Miller, Canfield, Paddock and Stone PLC: "There is nothing wrong with hiring a relative."
A former Lear executive says officers' relatives "were not excessively paid and did not get positions beyond the scope of their talent." The arrangements with Lear vendors employing Lear relatives were at arm's length, he says.
The ties between relatives and Lear's officers and directors are not new, say industry executives. But their number is worth noting. A recent story in The Wall Street Journal cited Lear as having the highest number of "family ties" -- 17 -- of the 300 companies that it surveyed.
In the beginning
Lear was created in 1988 when the management of the seating division of the former Lear Siegler Inc. was acquired by a management team, led by Ken Way, Rossiter and Vandenberghe. They staked their personal fortunes on the $500 million leveraged buyout. Rossiter raised money by taking out a second mortgage on his house.
The company went public in 1994. The top 24 executives and directors own about 1.9 million Lear shares, representing 2.8 percent of the company's stock.
"The culture has evolved with the group behaving like a family," says a veteran industry executive. "They took the company public -- ostensibly to raise money in return for transferring the company to public ownership -- but they remain in charge."