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Fiat Chrysler Automobiles has landed in trouble with shareholders as the Auburn Hills corporation is mandated to shell out a $40-million penalty imposed by the U.S. Securities and Exchange Commission, concluding a lengthy federal investigation.
As per an official statement unveiled by the SEC, the agency criticized FCA for inaccurately documenting new vehicle sales and manipulating the figures by exaggerating them and highlighting a continuous monthly year-over-year sales growth trend between 2012 and 2016.
Antonia Chion, the SEC’s associate director for the enforcement division, emphasized in the statement that “New vehicle sales figures offer investors valuable insights into an automaker’s product demand, a pivotal aspect in evaluating the company’s performance. This scenario underscores the necessity for businesses to truthfully disclose their prime performance metrics.”
According to a report from Reuters, FCA tampered with its sales figures to give the impression that the company was achieving better performance than it actually was. Allegedly, the company engaged in this deceptive practice by compensating dealers to fabricate new car sales data while keeping a concealed record of unreported vehicle sales, internally labeled as a “cookie jar,” as testified by dealers and employees. Two Illinois dealerships pursued civil racketeering lawsuits against FCA in response to these unethical behaviors.
Whenever the company lost a sales streak, it then reportedly resorted to utilizing that “cookie jar” to account for those previously unreported vehicle sales to create an illusion of achieving a specific goal or quota at that time.
Consequently, the SEC has accused FCA of deceit under the Securities Act of 1933 and the Securities Exchange Act of 1934, along with other regulatory statutes.
“FCA US fully cooperated in the resolution process of this matter,” affirmed the automaker in an official statement disclosed by Reuters after the SEC’s publication. “The company has reviewed and enhanced its policies and procedures and is dedicated to upholding robust controls concerning its sales reporting. The resolution entails a $40 million payment that will not significantly impact the company’s financial statements.”
Prior to this fraudulent sales revelation, headlines emerged when Ram brand chief, Reid Bigland, filed a whistleblower lawsuit against FCA for purported retaliation. Bigland collaborated with the SEC in its investigation of the automaker before allegedly facing a 90 percent reduction in pay, which triggered his legal action.
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