Government declines to file charges against 9 former Delphi execs

An SEC case against the executives still is pending.

DETROIT (AP) — The U.S. Justice Department has decided not to file criminal charges against nine former Delphi Corp. officials involving allegations of accounting fraud at the struggling auto-parts maker.

In a Nov. 21 letter to a federal judge in Detroit, Steven A. Tyrrell, chief of the department’s Fraud Section in Washington, said his office had contacted attorneys for the nine “targets and subjects” of the investigation and “advised them that we had declined prosecution of them.”

The letter did not say why the decision was made, but said the government would not prosecute former Chief Executive J.T. Battenberg; former Chief Financial Officer Alan Dawes; former Treasurer and Senior Vice President John Blahnik; former Controller and Chief Accounting Officer Paul Free; former Director of Capital Planning and Pension Analysis Milan Belans; former Director of Financial Accounting and Reporting Catherine Rozanski; former Director of Finance in Delphi’s information technology department Judith Kudla; Laura Marion, Delphi’s former director of financial accounting and reporting; and former Vice President and Chief Information Officer Peter Janak.

Justice Department spokesman Bryan Sierra on Tuesday confirmed the decision not to prosecute but declined to comment further.

Some of the officials still are the subjects of Securities and Exchange Commission complaints on similar fraud allegations.

Tyrrell said in the letter that it was investigating sham transactions and accounting fraud designed to artificially inflate Delphi’s income.

Troy-based Delphi, the nation’s largest auto supplier, filed for bankruptcy protection in October 2005. It is the former parts-making operation of General Motors Corp. that was spun off as a separate company in 1999.

Tyrrell’s letter, reported Tuesday by the Detroit Free Press, was sent to U.S. District Court Judge Gerald Rosen, who is considering the settlement of lawsuits filed by investors who also accused Delphi’s former managers of fraud.

Delphi announced in August that the lawsuits, filed by investors including several pension plans, had been settled, pending approval by Rosen.

An SEC investigation found that Delphi manipulated its earnings from 2000 to 2004, using several illegal schemes to boost its earnings, including the concealment of a $237 million transaction in 2000 with GM involving warranty costs.

SEC spokesman John Heine said the agency does not comment on pending cases.