BorgWarner pays $950,000 penalty for misstated asbestos liabilities
The Securities and Exchange Commission on Wednesday settled charges against Auburn Hills-based BorgWarner Inc. for failing to account for more than $700 million in asbestos liabilities in its financial statements.
The SEC's order found the auto-parts supplier violated reporting and internal accounting rules of federal securities laws. BorgWarner has agreed to pay a penalty of $950,000 and to cease and desist from future violations, though it did not admit to or deny the government's findings.
BorgWarner no longer produces asbestos-containing products. Exposure to the mineral can lead to the development of diseases such as mesothelioma even decades later. A BorgWarner spokeswoman did not immediately respond to request for comment.
The reporting failures, according to the SEC, took place between 2012 and 2016. BorgWarner did not conduct substantive quantitative studies to estimate legal claims from workers exposed to the asbestos, according to the order, despite having nearly 40 years of historical raw claims data. The company erroneously relied on untested assumptions to conclude it could not estimate its liabilities for these claims, the government said.
“Companies cannot claim an inability to reasonably estimate liabilities when the data they need to do so is available,” Carolyn Welshhans, the SEC Enforcement Division's associate director, said in a statement.
Starting in 2017, BorgWarner reported a charge for these claims that it eventually stated could total $703.6 million. The company's shares were falling 1.7% in after-hours trading.