Accounting & Tax

SEC Plans to Charge EDS Controller

Other former employees of the outsourcing giant may receive Wells Notices.
Stephen TaubJuly 26, 2006

Officials at Electronic Data Systems said controller and principal accounting officer Scot McDonald has received a Wells Notice from the Securities and Exchange Commission related to a previously disclosed SEC investigation into transactions between EDS and Delphi Corp.

The outsourcing giant also said it reassigned McDonald to the position of vice president of financial planning and analysis, and appointed chief accountant William Casper as interim controller and principal accounting officer. Casper will receive a cash retention award of $60,000 for each six-month period in which he serves in his interim role, noted the company’s SEC filing.

In addition, one or more former EDS employees may have also received Wells Notices, noted the company statement.

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EDS stressed that the company itself has not received a Wells Notice, which advises persons that are under investigation that the SEC staff is considering recommending a civil action against them. The notices are issued to provide potential defendants with an opportunity to present their position to the SEC staff before any formal staff recommendation is made.

EDS added that it continues to cooperate with the SEC staff in this matter.

In July 2004, EDS disclosed that it voluntarily reported to the SEC staff a matter regarding a transaction with a third party, which was subsequently identified as Delphi, the auto parts and component supplier. The transaction was not material to EDS’s financial position, the company emphasized.

Then, in September 2004, Delphi reported that it received a formal order of investigation from the SEC in August 2004, indicating that the commission’s staff had launched an inquiry regarding, among other things, payments made and credits given by EDS to Delphi during 2000 and 2001, and certain payments made by Delphi to EDS for system implementation services in 2002 and early 2003.

In September, Delphi revealed in a regulatory filing that the SEC was scrutinizing the accounting treatment for $46 million in payments and credits that it received from EDS in 2000 and 2001.