DETROIT -- The number of defendants left in the civil securities-fraud case against former Delphi CEO J.T. Battenberg III and other former company officials is down to two.
Milan Belans, an assistant treasurer who had been accused of securities fraud for his role in allegedly improper transactions that Delphi struck in 2000 and 2001, “is no longer a defendant in this case,” U.S. District Judge Avern Cohn told jurors today. He didn't elaborate.
Belans' attorney, Charles Murphy, said his client is in discussions with the Securities and Exchange Commission but that it's too early to confirm whether a settlement has been reached.
That leaves Battenberg and former Delphi accounting director Paul Free as the only defendants remaining in a lawsuit filed by the SEC in 2006.
The SEC says Battenberg, now 67, was “reckless” in signing fraudulent SEC financial disclosures and was directly involved in a 2000 agreement between Delphi and General Motors that the SEC claims was mischaracterized in disclosures to investors.
The suit originally charged 13 people at Delphi and companies that did business with Delphi, accusing them of various roles in four separate transactions. The SEC says the business deals were booked in a way that misled investors by inflating Delphi's financial results following its separation from GM. Most of them settled their cases years ago.
Belans' exit makes it less likely that Battenberg will take the stand. Belans' attorneys had planned to call Battenberg as a witness, according to court documents.
SEC attorneys are expected to wrap up calling witnesses on their list by Friday, and aren't expected to call the former CEO.
Also at trial today, Delphi's former top securities lawyer said she pressed Delphi management in late 2000 to be more forthcoming in its disclosures to shareholders about details of a $237 million settlement Delphi had reached with GM, its former parent company.
The SEC says the entire payment was to compensate GM for faulty parts Delphi had supplied to the automaker. Delphi purposely disguised most of it as pension-related costs stemming from its separation from GM, artificially inflating Delphi's profits, the SEC says.
Former Delphi securities lawyer Barbara Novak thought draft SEC documents Delphi had prepared downplayed the nature of its warranty fight with GM by presenting it as a settlement mostly related to pension costs, she told the courtroom.
Days before Delphi filed its third-quarter financial statement in October 2000, CFO Alan Dawes agreed to include many of her disclosure suggestions, Novak testified. But when she saw a revised draft the next day, none of her input was included.
“I was very concerned because I thought the description in the document was very misleading,” said Novak, who now works at auto supplier ArvinMeritor Inc. and teaches a securities-law course at the University of Michigan.
She told the 10-person jury that she eventually left Delphi because “they fought too hard against SEC disclosures that I thought should be made.”
Under questioning from defense attorneys, Novak acknowledged that her boss, former Delphi general counsel Logan Robinson, thought she was “too conservative” when it came to securities disclosures. And she said she believed the way Delphi ended up disclosing the GM transaction in its SEC filing in late 2000 was appropriate.
In 2005, Delphi restated its earnings for that period, acknowledging that the $237 million should have been entirely booked as a warranty payment.