DETROIT (Bloomberg) -- Former Delphi Corp. CEO J.T. Battenberg and four other former managers will begin trial Oct. 4 in a securities-fraud lawsuit brought by the U.S. Securities and Exchange Commission, a federal judge said.
The SEC sued Battenberg and the other executives in 2006, alleging they “engaged in one or more fraudulent accounting or disclosure schemes” before the auto-parts supplier filed for bankruptcy protection in 2005. The SEC claims Battenberg was responsible for the company materially misstating its financial condition.
U.S. District Judge Avern Cohn denied Battenberg’s request to dismiss the case last month and today set Oct. 4 for opening statements in the trial. Jury selection for the trial in federal court in Detroit will start the week before, Cohn said.
“A jury will determine the liability of each defendant,” Greg Miller, an SEC attorney, said today in an interview outside court. Should the jury find against any defendant, “the judge will assess damages.”
Delphi, once the largest U.S. auto-parts supplier, filed for bankruptcy in October 2005, after failing to win wage cuts from workers and financial aid from its former parent, General Motors Corp. The company emerged from bankruptcy under the new name of Delphi Holdings LLP in October.
The SEC also sued Delphi, which settled in 2006 without admitting any wrongdoing.
The other defendants at trial are Paul Free, former Delphi controller and chief accounting officer; Milan Belans, former director of capital planning and pension analysis; John Blahnik, former treasurer; and Catherine Rozanski, former accounting director.
The SEC claimed Delphi artificially inflated share prices by issuing misleading statements in the years before the bankruptcy.
“In the fourth quarter of 2000, Delphi sold approximately $270 million of inventory to two third parties while simultaneously agreeing to repurchase the inventory in the following quarter for the original sales price,” the SEC said in its complaint.
“By improperly accounting for the transactions as true sales, rather than financing transactions, Delphi improperly recognized a material amount in cash flow from operations,” the SEC said. This resulted in a material overstatement in its reported income for that quarter, the government said in the complaint.
The defendants said there were no attempts to mislead investors and that they weren’t involved in fraud.