-->Friday, November 19, 2004

DCX audits to get more scrutiny

Former employee alleges the firm didn't review reports of accounting fraud.

By David Shepardson / The Detroit News


DaimlerChrysler AG's Chrysler Group is facing further scrutiny of its auditing practices in the wake of a second federal lawsuit by a former employee.

Christine Holtzmann, who ran day-to-day operations in the Chrysler office that reviews allegations of improper business practices and was responsible for filing reports to DaimlerChrysler's audit committee about the office's activities, filed a whistleblower lawsuit Thursday against the automaker.

In the suit, filed in U.S. District Court in Detroit, Holtzmann charges that Chrysler failed to properly investigate reports of accounting fraud.

She is the second former Chrysler employee to claim misconduct by company auditors in the last six weeks.

The Securities and Exchange Commission is reviewing the allegations.

Holtzmann claims in court documents that during an 18-month period ending in September 2003, there was no preliminary investigation or disclosure of a dozen complaints to the audit committee.

"There were some high-level cases that were being kept in a separate file cabinet," said Laura Fentonmiller, a Royal Oak lawyer for Holtzmann.

"In some cases, complaints were falsely backdated as closed years before they were actually opened, she said."These cases were intentionally being removed from the radar. Shareholders needed to know that."

Holtzmann's allegations and those of a second former employee, David Bazzetta, are the subject of SEC inquiries into whether the company has complied with U.S. securities laws.

Last month, Chrysler parent DaimlerChrysler disclosed the complaints in a public filing.

Chrysler didn't reveal Holtzmann's identity in the filing, but Chrysler spokesman Mike Aberlich said Thursday that the automaker believes Holtzmann is the second person referenced.

The SEC has launched a formal investigation into Bazzetta's complaints, and has asked Chrysler to provide information about Holtzmann's case.

Both former employees suggest they were retaliated against for raising questions about company auditing procedures.

Chrysler declined to address questions about the claims, except to reiterate that it is cooperating with the SEC.

Bazzetta, a former company auditor fired in January after 21 years with the company, claimed DaimlerChrysler maintained at least 40 secret bank accounts to bribe foreign government officials in South America -- despite the fact that the practice is a violation of U.S. securities laws.

He said Hubertus Buderath, vice president of corporate audit, had briefed DaimlerChrysler Chairman Juergen Schrempp about the existence of the secret bank accounts.

Bazzetta also said at least three audits that uncovered"questionable business practices" were not published until they were dramatically changed. The"buried" reports could have affected the company's financial reports between 2001 and 2003, he said.

He made his allegations in a federal lawsuit filed Sept. 28. On Nov. 15, the Department of Labor said it found no"reasonable cause" to believe that Bazzetta had been improperly fired.

Holtzmann was interviewed Monday in Royal Oak for more than three hours by a team of three senior SEC attorneys, led by Moira T. Roberts, a branch chief in the SEC's division of enforcement, Fentonmiller said. That followed a 90-minute telephone interview the previous month.

Holtzmann's March 16 complaint filed with the Labor Department said she was aware of bribery allegations and had informed Buderath. She also claimed the company's director of corporate audit, Laurie Macaddino, didn't respond to conflict-of-interest inquiries.

"I told (Hubertus Buderath) that the Government Affairs office had contacted Laurie (Macaddino) in September about a serious issue where there were indications that a judge, who was responsible for presiding over DaimlerChrysler cases, was attempting to extract money out of the corporation in exchange for favorable rulings," Holtzmann said in her complaint.

Bazzetta was interviewed by Roberts and two other SEC lawyers in the last month, said Kathleen Bogas, a Bloomfield Hills lawyer for Bazzetta.

Holtzmann was fired in December 2003, after 18 years with the company, following a meeting with Gary Valade, then a DaimlerChrysler executive vice president and a member of the business practices committee.

She said a letter terminating her cited"inappropriate, insubordinate behavior" but didn't offer specifics. She said she had received stellar reviews from bosses, until she raised questions about the review of audits.

"There were some high-level cases that were being kept in a separate cabinet."

<ul> ~ http://www.detnews.com/2004/autosinsider/0411/19/B01-10023.htm</ul>