Navistar International Corp. (NAV:US), an Illinois truck maker, was sued by investors who claimed executives made misleading statements about its ability to build engines that complied with U.S. emissions standards.
Former Chairman and Chief Executive Officer Daniel Ustian and current Chief Financial Officer Andrew Cederoth made the statements to conceal the company’s difficulty in perfecting an engine that burns off pollutants internally, the Norfolk County Retirement System of Massachusetts said in a complaint filed today in federal court in Chicago.
The so-called Exhaust Gas Recirculation engine was needed to meet U.S. Environmental Protection Agency standards for 2010 model trucks, according to the complaint.
Ustian “repeatedly stated that Navistar had indeed achieved an engineering milestone and had an EPA-compliant EGR engine ready to be certified,” according to the complaint. “In fact, the EGR technology was not -- and would never be -- able to meet EPA requirements.”
Navistar, based in Lisle, Illinois, resorted to paying a non-compliance fine for each engine it sold, a practice disallowed by a U.S. appeals court last year, and by employing the same selective catalytic reduction or SCR technology used by other truck makers, which relies on the treatment of exhaust with a urea-based chemical after it leaves the engine, the pension plan alleged.
Announced delays in the company’s ability to develop a compliant engine caused shares to fall 15 percent to $24.42 at the close of trading on July 6, their biggest plunge since 2008. Ustian announced his retirement as chairman and CEO in August after an announcement that Navistar was being investigated by the U.S. Securities and Exchange Commission.
Navistar fell 9 cents to $32.45 today in New York Stock Exchange composite trading (NAV:US). The shares have declined 14 percent in the past 12 months. The shares traded for as much as $70.17 in April 2011 because of the earlier false statements, the 10,000-member Norfolk County Retirement System claimed.
The pension plan seeks to proceed on behalf of investors that acquired Navistar shares between June 9, 2010, and Aug. 1, 2012, and an award of unspecified money damages.
“As a matter of policy, Navistar does not comment on pending litigation,” Steve Schrier, a spokesman for the company, said today in an e-mailed statement.
The case is Norfolk County Retirement System v. Navistar International Corp., 13-cv-02639, U.S. District Court, Northern District of Illinois (Chicago).
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