Deloitte US sued $500m for bad advice
Deloitte US is being sued for $500m by former client Navistar, which claims bad advice forced it to restate three years' worth of profits, costing almost $2bn
DELOITTE’S US ARM is being sued for $500m (£302m) by Navistar International, which has claimed the firm’s bad advice forced it into a costly restatement of results.
The maker of heavy-duty vehicles argued that its former auditor bowed to pressure from federal regulators, leading it to rescind on the good audit opinions it gave between 2002 and 2005, Reuters reports.
Navistar ended a 98-year relationship with Deloitte in 2006 and later restated its results for the fiscal years 2003 and 2004, as well as the first three-quarters of 2005. It was forced to make up underpayments in its income taxes and how it recorded pensions and warranty reserves, costing almost $2bn in charges and additional levies.
In a 134-page complaint, the manufacturer accused Deloitte of lying, saying that its “internal quality control problems were so pervasive that the chance of ‘competent’ accountants and auditors being assigned to Navistar and Deloitte’s other clients was as random as roulette”.
Deloitte has described the claim as “an utterly false and reckless attempt to shift responsiblility for wrongdoing”, saying Navistar’s own management is at fault and has been sanctioned by the Securities and Exchange Commission “for the very matters alleged in the complaint”.
Navistar hired KPMG as its replacement auditor, and the lawsuit has been filed in an Illinois state court in Chicago.
