Former Navistar CEO Daniel Ustian, SEC Ready to Discuss Settlement

Former Navistar International Inc. CEO Daniel Ustian and the U.S. Securities and Exchange Commission have indicated they are ready to discuss a possible settlement in a civil lawsuit citing Ustian with “misleading investors and aiding and abetting violations” of federal clean air laws.

In a federal court filing Aug. 31, the parties told a federal judge they are “interested in participating in a settlement conference.” On Sept. 7 a judge scheduled the settlement conference for Dec. 11.



In its lawsuit, SEC said Ustian made fraudulent statements to the public about Navistar’s ability to meet a U.S. Environmental Protection Agency deadline to comply with rigorous emission standards for heavy-duty diesel truck engines. The lawsuit, filed in March 2016, alleged that Ustian led “a campaign of deception” from late 2010 through 2012.

The lawsuit was filed the same day that Lisle, Ill.-based Navistar, without admitting guilt, agreed to pay a $7.5 million civil penalty also for misleading investors about its development of a diesel truck engine that could be certified to meet U.S. emission standards using solely in-engine exhaust gas recirculation technology. All other vehicle and engine-makers went with selective catalytic reduction to comply with the regulations.

Court documents said the first Navistar EGR prototype engine could only run in a testing lab, and when a Navistar senior technical specialist asked other engineers “would this engine ever be drivable in a truck?” he received “laughs in response.”

The engineer described the first prototype engine as “an underpowered … engine that is coughing, sputtering and wheezing like some terminal cancer patient on a respirator,” court documents said.

“Rather than tell the public the truth and face these consequences, Ustian engaged in a progressively desperate and fraudulent scheme to deceive the investing public into believing that EPA certification of a competitive EGR-only engine that met the 0.20 NOx standard was right around the corner,” said the civil complaint filed in federal district court in Chicago. “The deception was manifested in Ustian’s and Navistar’s statements in conference calls with analysts, in press releases and in reports filed with the SEC.”

The company abandoned its EGR program in 2012, and soon after Ustian left the company. Navistar now uses SCR, in step with other OEMs.

“When public companies and top executives discuss important regulatory developments with investors, they must tell the whole truth,” Andrew Ceresney, director of SEC’s Division of Enforcement, said in a statement last year.