WASHINGTON -- Fiat Chrysler Automobiles will pay $40 million for misleading investors about its monthly sales figures and will resolve a lengthy probe by the U.S. Securities and Exchange Commission.
The SEC, in a statement Friday, said that between 2012 and 2016 FCA's U.S. unit issued monthly press releases falsely reporting new vehicle sales and falsely touting a "streak" of uninterrupted monthly year-over-year sales growth, when the growth streak had actually ended in September 2013. In July 2016, the company revised more than five years of monthly U.S. vehicle sales figures to reflect a new reporting method.
Two FCA dealerships filed a federal lawsuit over the inflated sales figures in January 2016. The case was settled earlier this year, but terms were not disclosed. Two other cases were filed by investors claiming securities fraud and those cases were later settled for $14.75 million, Bloomberg reported.
FROM OUR ARCHIVE: Sources: FCA found sales were inflated
FCA, in a statement issued Friday following the SEC announcement, said: "FCA US cooperated fully in the process to resolve this matter. The company has reviewed and refined its policies and procedures and is committed to maintaining strong controls regarding its sales reporting. The settlement requires a payment of $40 million which will not have a material impact on the financial statements of the company."
The SEC said Fiat Chrysler put pressure on its business centers "to increase sales, maintain the year-over-year sales streak, and hit internal sales targets, particularly on the last sales day of the month" and as a result some employees at most of the Business Centers "engaged in fake sales reporting."
Dealers were paid to report fake sales in a company database using "cooperative marketing funds" to disguise the payments, the SEC said, adding the database "contained false vehicle sales entries, including false customer names and dates of sales."
The suit said that at the direction of its head of U.S. sales the company used a database of fleet and certain other retail sales "to misreport vehicle sales results and year-over-year growth percentages every month."
Employees referred to the vehicle sales saved for public reporting, the SEC said, with terms like "cookie jar," the "bank," the "bag," and the "kitty."
The Detroit 3 automakers have ended the practice of reporting monthly sales figures and now report on a quarterly basis.
It was unclear if the settlement would close the government's investigation into the sales reports. The Justice Department declined to comment on the status of its investigation.
In May, Fiat Chrysler's U.S. sales chief Reid Bigland sued the company claiming it withheld 90 percent of his 2018 compensation because he cooperated with the SEC probe. An Oct. 3 hearing is set in the suit.
Bigland said in his lawsuit that the company's sales reporting methodology had been in place since the late 1980s and was widely known throughout the company including by Sergio Marchionne, who was CEO until his death in July 2018, and other senior executives.
