Former top employees at Delphi Corp have asked a bankruptcy judge to force the parts maker to cover legal costs from responding to federal subpoenas and civil lawsuits over the company's accounting woes.
Attorneys for former Chief Executive J.T. Battenberg and ex-Chief Financial Officer Alan Dawes; former executives Paul Free, John Blahnik and Pamela Geller; and other ex-managers filed the requests Thursday in New York.
The former employees asked Judge Robert Drain to force Delphi to advance legal fees and costs, or to allow a corporate insurer to advance defence costs. Delphi halted such payments after filing for bankruptcy in October 2005.
"It puts our clients in a very difficult position trying to protect themselves," said Richard Rossman, a Detroit attorney representing Free, who filed the motion asking the court to require Delphi to advance legal fees and costs.
The request came the same day the Detroit News reported that US securities regulators could lodge civil fraud charges against up to a dozen former Delphi executives by the end of October under a long-running accounting probe.
Delphi spokeswoman Claudia Piccinin declined to comment on those reports, as did SEC spokesman John Heine. The statute of limitations for the investigation had been extended until October 31 and no further extensions are expected.
Delphi has been co-operating with US Securities and Exchange Commission and US Justice Department investigations of accounting improprieties that forced restatements back several years and attracted numerous securities lawsuits.
Before the bankruptcy, Delphi had paid legal expenses under corporate bylaws, but was granted discretion at its request early in the reorganisation and stopped paying.
The SEC launched a probe into Delphi's accounting in 2004 in connection with information technology transactions, leading to a Delphi internal investigation as well. Dawes resigned in March 2005. Free, Blahnik and Geller also left Delphi in 2005, as did mid-to-lower level managers who Delphi did not identify then.
Ultimately, Delphi found improper accounting for rebates and other lump-sum payments from suppliers, off-balance sheet financings of indirect materials and inventory, and payments and credits for warranty and health-care issues.
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