by Jocelyn Parker
Free Press Business Writer
SOUTHFIELD, MI — Auto-interiors supplier Lear Corp. said Tuesday the Securities and Exchange Commission has opened an informal investigation into its employment of corporate officers’ relatives and insider business transactions.
The Southfield, Mich., parts maker said the SEC might look at several years of SEC filings that outline familial connections within the company, which include more than a dozen workers and upper-level executives. The latest filing, the company’s 2003 proxy statement, reveals that CEO Robert Rossiter had at least seven relatives working for Lear or for a company associated with Lear in 2002.
Other high-ranking officers, including Douglas DelGrosso, president and COO for Europe, Asia and Africa, and Lear Vice Chairman James Vandenberghe, have relatives working for Lear.
The proxy also shows that Lear gave business to companies with family relationships. For example, Terrence Kittleson, Rossiter’s brother-in-law, is executive vice president of Trammell Crow Co. In 2002, Lear paid more than $2 million to Kittleson’s firm for facility-maintenance services and $73,000 for real estate services.
Relatives of officers also received lucrative salaries and compensation. David Way, son of Ken Way, who retired as Lear’s chairman in 2002, was paid $103,169 in 2002 as a sales director in Lear’s DaimlerChrysler division. He also received stock options.
Mel Stephens, vice president of investor relations for Lear, said: “We intend to cooperate completely and provide any information that the SEC needs.”
Lear first revealed the working relationships and insider deals in a September 2002 filing, despite SEC requirements that related-party transactions be reported each year. Lear is to file was an amendment to its 2001 annual report. It was unclear Tuesday how many years of documents the SEC might examine.
In an investigation in December, the Wall Street Journal found that Lear had more relatives of senior executives tied to the company than any of the other 399 companies the newspaper examined.
The SEC would neither confirm nor deny an investigation.
An officer for one of Lear’s major shareholders said she was very concerned about nepotism at Lear.
“I think it’s extremely disappointing that they didn’t properly disclose the related-party transactions,” said Cynthia Richson, corporate governance officer with the Ohio Public Employees Retirement System, which owns 401,132 Lear shares. “I think it’s a red flag to us.”
Lear said the SEC had advised the company that the inquiry doesn’t necessarily mean the company has broken any laws.
David Leiker, an analyst with Milwaukee brokerage firm Robert W. Baird, said he doesn’t think the probe would rock investor confidence, but only time will tell.
“I think this is a nonissue unless the inquiry uncovers something that impaired shareholder value or disenfranchised shareholders,” he said. “I think this is unlikely, but you never know these days.”
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