The Securities and Exchange Commission today charged General buy celecoxib 200 mg Motors (NYSE: GM) with GAAP violations and GM has agreed to pay a $1 million penalty over deadly ignition swiches. This deal settles charges that deficient internal accounting controls prevented the GM from properly assessing the potential impact on its financial statements of defective ignition switches found in many GM vehicles. GM agreed to an administrative SEC Cease and Desist Order. (Former Federal Prosecutor to Oversee GM Felony Plea Bargain on Ignition Switch Deaths that let Senior Executives Walk, Senate Hearing to Roast Mary Barra, Mike Millikin, Rodney O’Neal Tomorrow, Where’s the Independent Investigation of NHTSA for Failure to act on Deadly GM Ignition Switches and Air Bag Failures?)
Per the SEC’s order, when “loss contingencies such as a potential vehicle recall arise, accounting guidance requires companies like General Motors to assess the likelihood of whether the potential recall will occur, and provide an estimate of the associated loss or range of loss or otherwise provide a statement that such an estimate cannot be made.”
Without admitting or denying the charges, General Motors consented to the SEC’s order finding that the company violated Section 13(b)(2)(B) of the Securities Exchange Act by not devising and maintaining a sufficient system of internal accounting controls. “The SEC settlement does not call into question any of GM’s current or prior financial statements or its disclosures. Also, no material weakness or significant deficiency was found by the SEC,” said GM.
“Internal accounting controls at General Motors failed to consider relevant accounting guidance when it came to considering disclosure of potential vehicle recalls,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office. “Proper consideration of loss contingencies and assessment of the need for disclosure are vital to the preparation of financial statements that conform with Generally Accepted Accounting Principles.”
The models equipped with defective ignition switch were the 2005, 2006, and 2007 Chevrolet Cobalt; the 2005, 2006, and 2007 Pontiac G5; the 2003, 2004, 2005, 2006, and 2007 Saturn Ion; the 2006 and 2007 Chevrolet HHR; the 2007 Saturn Sky; and the 2006 and 2007 Pontiac Solstice. (NHTSA Fines GM a Paltry $35 Million for Ignition Switch Fiasco, NHTSA Changing after Flubbing GM Ignition Switch Recall)
The SEC’s order finds that the company’s internal investigation involving the defective ignition switch wasn’t brought to the attention of its accountants until November 2013 even though other General Motors personnel understood in the spring of 2012 that there was a safety issue at hand. Therefore, during at least an 18-month period, accountants at General Motors did not properly evaluate the likelihood of a recall occurring or the potential losses resulting from a recall of cars with the defective ignition switch. (NHTSA Changing after Flubbing GM Ignition Switch Recall and GM Ducks Criminal Charges in Ignition Switch Recall Debacle, Incurring $1.575 Billion in Costs, so far, to Stockholders Because of a Decade long Covered Up about Killing Customers)
