April 9, 2013
At last month’s Mid-America Trucking Show, Navistar was among the must-see attractions.
The company, still working to dig itself out from under its big bore EGR engine nightmare, had some extraordinarily impressive trucks and technology on display.
At a press event, a confident Troy Clarke delivered an encouraging economic outlook tempered with just the right amounts of reality and humility.
He starred. Stole the show.
The company’s 13-liter engine was barely a month from hitting the market. The company’s Cummins-partnered 15-liter was making positive waves in the market and hit all key target dates on or ahead of schedule.
Things were looking up and spring was supposed to be a season of re-genesis, setting the stage for a major comeback next year.
After a fairly disastrous 2012, Navistar was rebuilding Rome.
What a difference three weeks make.
You can sue anybody for anything at any given time, but you don’t toss around the word “fraud” loosely.
That word appears 12 times in a 33-page class action filing against Navistar, former CEO Dan Ustain and CFO Andrew J. Cederoth.
The word “false” is in there 17 times.
“Misleading” is in there 19 times.
The suit suggests that, at a time when the plaintiffs – the Construction Workers Pension Trust Fund – and countless other investors were pumping hundreds of thousands of dollars into Navistar based solely on forecasts and outlooks provided by the company’s leadership, two of Navistar’s highest ranking officials were cashing out their chips.
The suit claims between Nov. 3, 2010 and Aug. 1, 2012, the pension’s trust fund purchased 6,709 shares of Navistar stock for a total of roughly $246,000.
As the stock price bottomed out, the fund jumped ship and ate $81,000 – dumping their investment at around $24.59 per share.
In that same time frame, the filing says Ustain sold 55,469 shares for $3.9 million – more than $70 per share. Cederoth supposedly followed suit, liquidating 9,548 shares for $642,962 – more than $67 per share.
There’s nothing illegal – or even wrong with – selling shares of stock, but at the very least those two sentences in the document poke Ustain and Cederoth in the eye and put them in a position to explain their good luck.
The lawsuit filing isn’t a wedding invitation.
It’s an ugly document.
It paints an ugly picture.
The public was jumping on Navistar stock at an allegedly inflated price while its officers were storming out through the in door on the way to the bank.
In November 2010, while taking members of the press on a tour of the Huntsville, Ala. plant charged with making the doomed EGR technology happen, Ustain told members of the media the company’s engine was essentially operational and ready for certification.
In reality it was neither.
To-date, Navistar has done an admirable job of digging itself out of a financial hole, but this latest public relations hurdle could involve the Securities and Exchange Commission.
We’re not dealing with angry truckers and overwhelmed warranty managers anymore. This is the SEC. The feds. Again.
The chapters in this odyssey are still being written. The class action suit is simply the prelude, but it’s a vicious one.
Where this trail will wind is anyone’s guess, but rebuilding Rome and its reputation has just gotten a little harder.
Jason Cannon is Online Managing Editor of Successful Dealer. Follow him on twitter at @By_Jason_Cannon