Ex-Hertz CEO to pay $2m over accounting fraud charges
18 Aug 2020
The former CEO and chairman of Hertz, Mark Frissora, has been ordered to repay nearly $2m (£1.53m) in incentive-based pay to the US car rental giant, to settle charges relating to inaccurate financial statements and disclosures
18 Aug 2020
The Securities and Exchange Commission (SEC) has charged Frissora with aiding and abetting the company in a series of accounting violations.
The US regulator alleged that as Hertz’s financial results fell short of its forecasts throughout 2013, Frissora pressured subordinates to ‘find money,’ principally by re-analysing reserve accounts, causing Hertz’s staff to make accounting changes that rendered the company’s financial reports materially inaccurate.
The SEC also claimed that Frissora led Hertz to hold rental cars in its fleet for longer periods and thus lower its depreciation expenses, without properly disclosing the change – and the risks of relying on older vehicles – to investors.
In addition, the SEC alleged that Frissora approved Hertz’s reaffirming its earnings guidance in November 2013, despite Hertz’s internal calculations that projected lower earnings per share figures. Hertz revised its financial results in 2014 and restated them in July 2015, reducing its previously reported pretax income by $235m.
Without admitting or denying the allegations, Frissora consented to a judgment permanently enjoining him from aiding and abetting any future violations of the applicable federal securities laws, requiring him to reimburse Hertz for $1,982,654 in bonus and other incentive-based compensation and requiring him to pay a $200,000 civil penalty. The settlement is subject to court approval.
Marc Berger, director of the SEC’s New York regional office, said: ‘Investors are entitled to accurate and reliable disclosures of material information about a company’s financial condition.
‘We are committed to holding corporate executives accountable when their actions deprive investors of such information.’
In December 2018, Hertz agreed to pay $16m to settle related fraud and other charges brought by the SEC and in December 2019, the SEC issued an order against Hertz former controller Jatindar Kapur.
Hertz business model has been badly impacted by the coronavirus crisis, which has seen a collapse in consumer travel and the need for car hire, and the company recently filed for bankruptcy.