SEC fines Hertz Global $16m over accounting misstatement
Hertz Global Holdings has agreed to pay a $16m fine, set by the Securities and Exchange Commission (SEC), to settle a case over accounting misstatement which saw the company reduce its previously reported pre-tax income by $235m
2 Jan 2019
From February 2012 to March 2014, Hertz’s public filings ‘materially misstated pre-tax income because of accounting errors made in a number of business units, and over multiple reporting periods’.
On 16 July 2015, Hertz restated its financial results for 2012, 2013 and prior periods. Including revisions made in early 2014, the company reduced its previously reported GAAP pre-tax income by a total of $235m.
The SEC’s order said that the ‘restatement identified 17 areas with material accounting errors across the company’s business units, identified additional information regarding historical depreciation and planned holding periods, identified 11 separate material weaknesses in Hertz’s internal controls over financial reporting, and acknowledged that “an inconsistent and sometimes inappropriate tone at the top” had existed and may have contributed to a number of errors, misstatements and omissions.’
In the restatement one of the largest items, which accounted for a pre-tax misstatement of $48m, concerned various internal accounts associated with ‘subrogation’. Subrogation refers to Hertz’s efforts to offset expenses for vehicle damage during rental periods by recovering money from renters and other third parties.
In August 2014, Hertz announced the replacement of its lead independent director and in September 2014 it announced the replacement of its chief executive officer.
The car rental company did not admit or deny the regulator’s findings but agreed to pay the fine.
The SEC’s order on Hertz Global Holdings is here.
Report by Amy Austin