Feds probe Fiat Chrysler over alleged false sales reports
DETROIT – Federal prosecutors are investigating allegations that Fiat Chrysler violated securities laws by getting dealers to falsely report sales in order to inflate the company’s numbers.
The company confirmed the investigation Monday in a statement and said it’s cooperating fully with the Securities and Exchange Commission. FCA US LLC also said it has received a similar inquiry from the Justice Department.
The probe apparently stems from a lawsuit filed in January by the Illinois-based Napleton dealership group alleging that competing dealers were given thousands of dollars to report false sales. The group alleges that an FCA executive offered Napleton $20,000 to falsely report sales of 40 new vehicles. The lawsuit also alleges that the false sales give the appearance that FCA’s performance is better than it actually is.
The Italian-American automaker with U.S. operations based in Auburn Hills, Michigan, has reported 75 straight months of year-over-year sales increases since it left bankruptcy protection in 2009, a lengthy string for any automaker.
The SEC and Justice Department in Washington would not comment on the probe.
FCA’s statement said that it records revenue in its quarterly and annual financial statements based on shipments to dealers and customers and not on reported vehicle sales to end customers. But the statement doesn’t address the company’s monthly sales reports.
The Napleton lawsuit alleges that a competing dealership reported 85 false new vehicle sales and got tens of thousands of dollars in return. It also says FCA offered to pay the $20,000 to Napleton disguised as co-operative advertising support.
FCA has said the lawsuit is without merit and pledged to defend itself.
The company’s U.S. shares fell early in the day to $6.55 after news of the investigation was disclosed. But they rebounded by late afternoon and were flat at $6.75. In the past year the shares have traded in a range from $5.45 to $10.93.
The company said Monday afternoon that it confirmed the probe after media reports about it. Bloomberg News reported the investigation earlier Monday.