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The Securities and Exchange Commission charged former Hertz Chairman and CEO  Mark Frissora for allegedly aiding and abetting the bankrupt company’s financial reporting and disclosure failures.

In the complaint, the SEC alleged that Frissora committed his wrongdoing in 2013 when Hertz was facing financial and operational challenges. At the time, he was the Chairman and CEO of the company.

Allegations against Frissora

Frissora allegedly pressured his subordinates to “find money” to close the quarterly gaps between Hertz’budget forecasts and actual financial results. His subordinates re-analyzed the company’s reserved accounts totaling over $1 billion and made accounting changes. As a result, the company’s financial reports became inaccurate.

The SEC also alleged that Frissora led Herts to extend the planned holding periods for its rental cars before replacing them. The decision allowed the company to lower its depreciation expenses in the short-term. However, he did not properly disclose the company’s decision to investors.

The Commission further alleged that Frissora approved Hertz’s decision to reaffirm its earnings guidance in November 2013 even if he knew that the company’s internal calculations showed that its earnings guidance was down.

Frissora left Hertz on July 16, 2015. Following his departure, the company restated its financial results for 2013 and previous periods. The restatement showed material accounting errors in 17 areas including its reserves. The restatement also revealed that Hertz overstated its GAAP pretax income by $235 million.

According to the SEC, Frissora aided and abetted Hertz in violating the Securities Exchange Act. He violated the Sarbanes-Oxley Act by failing to reimburse Hertz for the requisite amount of incentive-based compensation.

the company in its filing of inaccurate financial statements and disclosures.  Frissora has agreed to settle the charges and repay Hertz nearly $2 million in incentive-based compensation.

Frissora agrees to settle SEC charges

According to the SEC, Frissora agreed to settle without admitting or denying the allegations against him.

He agreed to a judgment permanently prohibiting him from aiding and abetting any future violations of the applicable federal securities laws. He also agreed to an order requiring him to reimburse Hertz for $1,982,654 in bonus and other incentive-based compensation and to pay a $200,000 civil penalty.

In a statement, SEC 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.”

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