FBI: Criminal investigation

The criminal investigation by the FBI and U.S. Postal Inspection Service continues, led by Justice's fraud section in Washington.
In June, The News reported that at least seven ex-Delphi executives had received "Wells" notices from the SEC, which notify targets of an investigation of the substance of the staff's charges and probable recommendations.
Since then, several other former executives have received notices in a widening probe that includes roughly a dozen former executives. Some former lower-level Delphi employees, who testified before the SEC more than a year ago, recently were notified they were likely to face civil charges.
Many of the targets have been in settlement talks with the SEC. The SEC has sought to impose stiff fines against former executives -- in some cases nearly $1 million -- in the Delphi investigation. It isn't clear if any settlements have been reached or if Delphi will have to pay a corporate penalty.
Early this month, the five-member SEC received a detailed memo from the staff attorneys investigating Delphi outlining the proposed charges. The commission must approve the filing of any charges.
The SEC's investigation has been led by three attorneys in the enforcement section: Jonathan P. Scott, Kenneth R. Lench and Andrew Sporkin. All declined comment. The SEC has also scrutinized Delphi transactions with Bank One, GM, Tennessee-based Setech, and BBK Ltd., a Southfield-based turnaround firm. The commission also looked at the role of Delphi's former independent auditor, Deloitte & Touche. All of those companies turned over records to the SEC.
Last November, GM said it had overstated income for 2001 by approximately $300 million to $400 million -- or about 25 to 35 percent -- in connection with supplier credits. GM has said it received an SEC subpoena into "our transactions in precious metal raw materials used in our automotive manufacturing operations, and a federal grand jury recently issued a subpoena in connection with supplier credits."
The investigation into Delphi began after EDS -- another former GM subsidiary -- told the SEC in June 2004 about a $20 million loan in 2001 that Delphi booked as income. The SEC upgraded its probe into a formal investigation in August 2004.
One hurdle to settling SEC claims is the still active criminal investigation into the accounting fraud led by the Justice Department's fraud section. Jack Patrick, the lead Justice Department prosecutor, has been in Detroit in recent weeks working on the case. Patrick declined comment. Lawyers for shareholders who have sued Delphi and its former officers say the suit and the company's October 2005 bankruptcy are "the result of a massive accounting fraud."
"By any measure, the fraud at Delphi -- which hid Delphi's slide into bankruptcy -- is among the most egregious schemes to defraud investors in recent history," the plaintiffs said in a 147-page court filing in Detroit signed by Southfield lawyer Debra Pevos.
The filing suggested there were $440 million in sham transactions.
All of those suits have been consolidated in front of U.S. District Judge Gerald E. Rosen in Detroit, who hasn't ruled on whether they can go forward.