DETROIT -- Former Delphi CEO J.T. Battenberg III doesn’t remember receiving a voicemail from the company’s top lawyer in 2000 expressing concerns over how Delphi planned to report to investors the details of a large payment to General Motors, he testified today.
Logan Robinson, Delphi’s general counsel at the time, told jurors in Battenberg’s civil fraud trial last month that he left a voicemail warning his boss against “covering up” details of a $237 million payment Delphi was about to make to GM. How Delphi booked and disclosed that payment lies at the heart of the Securities and Exchange Commission’s case against Battenberg.
“I think I would have remembered it,” Battenberg said from the witness stand today, adding that he typically received as many as 200 voicemails a week at the time. “I don’t remember.”
Delphi executives’ concerns
Robinson’s testimony was the strongest so far to suggest that there were concerns among Delphi’s top executives about how the supplier planned to account for and disclose the payment to GM.
The SEC says the entire $237 million was to compensate GM for faulty parts Delphi had supplied the automaker before it was spun off in 1999. Delphi purposely disguised most of it as pension-related costs related to the spinoff, artificially inflating its profits, the SEC says.
Nearly five weeks of testimony has offered a behind-the-scenes view into major friction between what were then the world’s largest automaker and supplier. It also has underscored the hurdles Delphi faced in its first years as a stand-alone company, including the warranty spat with GM and an unexpected decline in contract awards from its former parent.
‘Advantage’ to Delphi
In Battenberg’s second day on the witness stand, he reiterated that he played no role in deciding how to book the payment and ultimately followed the advice of lawyers and attorneys that the accounting was sound. Under questioning by SEC attorneys, he acknowledged he knew that booking most of the $237 million as pension-related expenses rather than as warranty expenses “would be an advantage to Delphi.”
During her cross-examination of Battenberg, SEC attorney Jan Folena sought to build the SEC’s case that the pension issue was inserted into Delphi’s final settlement with GM at the last minute as a way to protect Delphi’s bottom line.
Battenberg acknowledged that the pension matter wasn’t discussed in several heated meetings he attended that summer with top GM officials. Instead, those discussions centered on the warranty claims GM was demanding, as well as Delphi’s gripes about declining business from GM.
Battenberg acknowledged reviewing a document that summer pegging Delphi’s exposure for warranty claims at $240 million to $248 million. He conceded that was the only dollar amount the two companies agreed on before reaching a settlement, even though the final agreement said it resolved the pension issue, too.
Folena asked Battenberg about having signed, in 2005, a restatement of Delphi’s 2000 financials that said the GM payment should have been recorded entirely as a warranty payment. Battenberg said that, even though he thought it was right in 2000, he relied on the advice of a new team of attorneys and financial staffers in agreeing to restate it five years later.
“I took the advice of the experts,” he said, “and signed the restatement in the best interest of the company.”