by Jamie Butters
Detroit Free Press Business Writer
TROY, MI — Collins & Aikman Corp. revealed Wednesday that it paid a board member $300,000 to serve as vice chairman for six months in 2002 and did millions of dollars of business with another board member.
The company had failed to fully disclose details on those transactions to shareholders.
The new information on deals between the Troy, Mich.-based auto parts maker and the two board members was included in an annual filing with the Securities and Exchange Commission, which the company filed Wednesday shortly after requesting an automatic extension.
After the insider deals were criticized by former company executives, the board’s audit committee, which includes former U.S. Sen. Warren Rudman of New Hampshire, investigated certain transactions and their accounting. The board complied with the committee’s recommendations and adopted stricter policies regarding deals with board members and disclosure of previous details.
Completing the audit committee investigation and, separately, winning the approval of independent auditor KPMG for its recent financial statements, puts a set of potential problems behind the company. But it still faces challenges as it seeks to make money for only the second time in six years and pay down or restructure its massive debts.
As part of an acquisition strategy that allowed C&A’s sales of instrument panels, automotive fabrics and plastics to more than double from $1.8 billion in 2001 to almost $4 billion last year, it bought many companies, including some from board members or people who later became board members.
As the company continued to lose money — and plants purchased from board members were listed among the company’s biggest money-losers — such deals were criticized by former executives.
After months of investigation, the committee, made up of a former Harvard Law School dean, a Canadian lawyer and Rudman, concluded that the deals were made in good faith, though they should have been more thoroughly discussed by the board and disclosed to shareholders.
But the committee determined that previous quarters’ financial statements would not need to be restated.
“I think it’s a good thing that the item was finalized and completed without any restatements.. . . It’s good to have that completed,” said treasurer Robert Krause.
To discuss and ultimately approve the audit committee’s findings, the board met Monday — the day the annual 10K filing was due.
Because of the paperwork associated with changing the nearly 100-page document, the company was not able to file on time, but its filing is not considered late, said Krause.
Tuesday afternoon, C&A filed for an automatic 15-day extension, which is allowed within 24 hours of the due date. It then completed the original filing late Tuesday night.
The company had not fully disclosed that it paid board member Charles Becker $300,000 for his half year as vice chairman of C&A’s board. He is also a limited partner in Heartland Industrial Partners, C&A’s biggest financial backer.
He had also been paid $11.3 million as part of a termination agreement, and rents space to C&A for $4 million a year.
The company also had not fully disclosed paying $4.2 million for a business purchased from Dutton Yarns, an affiliate of board member Elkin McCallum, nor paying $4.7 million in early 2003 to Joan Fabrics Corp., which is controlled by McCallum, for a series of transactions.
In the last two years, the company has purchased $65.1 million in goods and services from entities controlled by McCallum and sold him $38.2 million worth of goods and services. His businesses now owe C&A $1.7 million.
Copyright 2004 Detroit Free Press. All Rights Reserved.
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