This story has been updated to reflect that the jury ruled in favor of ex-CEO Ranko Cucuz, and against the Securities and Exchange Commission, on three of four counts. A previous version of this article, and its headline, said only that the CEO, along with the CFO, had lost the case. CFO.com regrets the error.
A federal jury ruled in the Securities and Exchange Commission’s favor in a civil fraud trial against the former CFO of automobile parts manufacturer Hayes Lemmerz International Inc. The jury ruled in the SEC’s favor on only one of four claims against the company’s CEO, however.
The SEC had charged ex-CEO Ranko Cucuz and ex-CFO William D. Shovers with engaging in securities fraud arising from an accounting scheme. Cucuz and Shovers are the last two remaining defendants in the SEC’s action. The jury ruling was in U.S. District Court for the Eastern District of Michigan.
Previously, the commission reached settlements with the company; with Ronald Lee Kolakowski, former president of ist North American Wheel Group; and with Jesus Bonilla-Valdez, former vice president of its Aluminum Wheel Group. In addition, the SEC previously settled related administrative proceedings against three other former Hayes employees: Allen Buntin, James Jarrett, and Greg Jones.
The commission’s complaint, filed on April 25, 2006, alleged that Hayes, acting through former senior officers and employees, engaged in a fraudulent scheme to achieve corporate earnings targets and mask declining operating results. It said that as a result of the fraudulent accounting scheme, Hayes made materially false filings in fiscal years 1999 and 2000, and for the 2001 first quarter, including for the Jan. 31, 2001, fiscal annual report, and quarterly reports for the April, July, and October periods of 2000 and the April 2001 period.
The complaint also alleged that Cucuz and Shovers made affirmative misrepresentations to the company’s outside independent auditor about Hayes’ financial statements and caused Hayes to make filings containing material misrepresentations.
In addition, the SEC alleged that Cucuz and Shovers took steps to conceal information about the improper accounting practices from Hayes’s outside independent auditor and its audit committee and board. It also said that Cucuz and Shovers made material misrepresentations about Hayes’s financial condition in connection with a $300 million bond offering by Hayes in June 2001.
While the jury ruled against CFO Shovers in all four claims, the SEC said, jurors found Cucuz not liable on three claims. Cucuz, according to his attorney, was found liable only on the claim of negligence in his handling of accounting issues, because they believed that Cucuz should have been aware of the actions of other employees.