NEW YORK, March 10, 2005 (PRIMEZONE) -- Wechsler Harwood LLP today announced that it has filed a Federal class action under the Employee Retirement Income Security Act ("ERISA") on behalf of participants in Delphi Corp.'s (NYSE:DPH) Savings Stock Purchase Program for Salaried Employees (the "Plan") who invested in the Delphi Common Stock Fund from May 28, 1999 to the present.
The action, entitled Kramer v. Delphi Corp., et al., Case No. (not yet assigned), is pending in the United States District Court for the Eastern District of Michigan, and names as defendants, the Company, as well as certain senior officers, directors, and Plan administrators who are either named or deemed Plan fiduciaries under ERISA. A copy of the Complaint can be obtained from the Court or can be viewed on Wechsler Harwood web site at: www.whesq.com.
The Complaint alleges that Delphi and other Plan fiduciaries violated provisions of ERISA by negligently misrepresenting and negligently failing to disclose material facts to the Plan and by negligently permitting the Plan to purchase and hold Delphi stock when it was imprudent to do so. Specifically, the Complaint alleges that defendants failed to disclose and misrepresented the following material adverse facts which were known to defendants or recklessly disregarded by them: (1) that improper accounting for off-balance sheet financing transactions in 2000 resulted in the Company overstating cash flow from operations, determined in accordance with generally accepted accounting principles ("GAAP"), for that year by approximately $200 million; (2) that the Company used sham sales of assets and other improper accounting maneuvers to inflate reported pretax earnings by a combined total of $166 million for the years 1999 to 2001. These moves increased cash flow from operations by a total of $446.5 million for 1999 through 2003; (3) that the Company during the Class Period prematurely recognized revenue for technology contracts and rebates when it should have spread them over the life of the contract. Other times it improperly capitalized expenses over time, rather than recognizing them immediately. It also boosted cash flow from operations and pretax earnings by claiming it sold assets and inventory that it had actually agreed to buy back later; (4) that the Company's financial statements were not prepared in accordance with GAAP; (5) that the Company lacked adequate internal controls and was therefore unable to ascertain the true financial condition of the Company; and (6) that as a result, the value of the Company's net income and financial results were materially overstated at all relevant times.
On October 18, 2004 (the "October 8-K"), Delphi announced that the Audit Committee of the Company's Board of Directors was conducting an internal review into the accounting treatment accorded to certain transactions with suppliers, including those for information technology services. The internal review was initiated in response to an investigation commenced by the staff of the Securities and Exchange Commission ("SEC") that was disclosed on a Form 8-K filed on September 29, 2004. The decision to delay filing of the Form 10-Q was made in light of the ongoing SEC investigation and internal review, as well as the fact that Deloitte & Touche LLP ("Deloitte"), the Company's independent registered public accounting firm, had informed the Company that due to the ongoing status of the internal review by the Audit Committee of the Board of Directors, Deloitte has been unable to complete its review of the unaudited Consolidated Financial Statements for the three and nine months ended September 30, 2004.
On March 3, 2004, Delphi announced that, "Vice Chairman and Chief Financial Officer, Alan S. Dawes, is leaving the company and has resigned from its Board of Directors and its strategy board. Additionally, the Company stated: "Mr. Dawes agreed to resign after the audit committee expressed a loss of confidence in him(.)" Additionally, the Company stated it would restate results after finding accounting errors from 1999 to 2004. Delphi stated that it overstated cash flow from operations by $200 million in 2000 because of errors in off-balance sheet financing and overstated pretax income by $61 million in 2001 because of improper accounting for rebates. As a result, financial statements from 2001 on cannot be relied upon. Delphi had not yet determined which prior results will have to be restated, but it expects to complete the changes by June 30.
News of the above shocked the market causing the publicly traded shares of Delphi to fall $0.91 per share, or 14.29 percent, to close at $5.46 per share on unusually high trading volume.
Wechsler Harwood has taken a leading role in many important actions on behalf of current and former employees who have suffered losses in their employer-sponsored retirement accounts due to breaches of fiduciary duties owed to them. The firm devotes a large part of its practice to pursuing such claims as well as claims by defrauded shareholders and consumers. If you wish to discuss this matter with an attorney or have any questions concerning this notice, your legal rights or any matter within our expertise, you may e-mail or call Wechsler Harwood who will, without obligation or cost to you, attempt to answer your questions. The Wechsler Harwood website (www.whesq.com) has more information about the firm and detailed information regarding this matter. For more information, please contact the following: