Judge Rules SEC Suit Against Former Navistar Exec Can Proceed
Navistar’s Advanced EGR diesels couldn’t meet EPA exhaust limits, but Chairman and CEO Dan Ustian promoted the products anyway, the SEC has charged. Photo: Tom Berg
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The federal government’s securities fraud suit against Daniel C. Ustian, former chairman and CEO of Navistar International, can proceed in spite of objections raised by Ustian’s attorneys, a federal judge has ruled.
Ustian had promoted a unique diesel exhaust emissions solution. But the Securities and Exchange Commission has charged in its suit that he knew it couldn’t work, with subsequent losses to company investors.
Federal Judge Sara Ellis, of the Northern District of Illinios, made the ruling earlier this week, reported the Springfield (Ohio) News-Sun.
“Because the SEC sufficiently alleges that Ustian’s statements were misleading and material to the investing public and that Ustian knew this, the SEC sufficiently states a claim for securities fraud,” wrote Judge Ellis. “The SEC also sufficiently alleges that Navistar violated the securities laws and that Ustian is liable for Navistar’s violations.”
Navistar’s Advanced EGR diesels couldn’t meet EPA exhaust limits, but Chairman and CEO Dan Ustian promoted the products anyway, the SEC has charged. Photo: Tom Berg
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From late 2009 and for several years after, Ustian said an approach called Advanced-EGR (exhaust-gas recirculation) would meet federal Environmental Protection Agency standards. But the SEC says continued testing by Navistar engineers showed it wouldn’t work. Meanwhile, Ustian led a marketing assault on competitors who used selective catalytic reduction, the exhaust aftertreatment requiring urea (diesel exhaust fluid) injection, as inconvenient and expensive.
Navistar investors revolted when serious problems with A-EGR became known, customers complained, sales sagged, expensive warranty claims caused losses for the company, and stock value fell. Ustian was dismissed in August 2012, and last year Navistar paid a $7.5-million fine to the government for violating emissions rules.
Judge Ellis further wrote that: “The United States Securities and Exchange Commission alleges that Defendant Daniel C. Ustian, Navistar’s former CEO and president, was so driven by a desire to produce an …Read the rest of this story
