Dana Holding Settles Accounting Fraud Charges

On September 11, the SEC issued an Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order against Dana Holding Corporation (as successor registrant to Dana Corporation). Dana Holding Corporation consented to the issuance of the Order without admitting or denying any of the findings in the Order.  The Order finds that from 2004 through mid-2005, contrary to Generally Accepted Accounting Principles, Dana Corporation (Dana) improperly recognized revenue or income on several transactions and delayed recording expenses in the appropriate period. During this period, former Dana employees of Commercial Vehicle Systems (CVS), a subdivision of one of Dana's two main business units, the Heavy Vehicle Technologies and Systems Group (HVTSG), engaged in a fraudulent scheme with former Dana employees of HVTSG to inflate CVS's financial results. As a result, Dana's financial statements were misstated, in part because the company: (1) recognized income on transactions where assets were never transferred or risk of ownership never passed, (2) recognized revenue for price increases on parts sales without agreement from the customers, (3) improperly deferred the recognition of steel surcharge expenses, and (4) recorded other improper accounting entries, including decreasing debts owed to suppliers without any contractual support or agreement from the suppliers and recording entries that increased income without any basis or supporting documentation. Dana overstated its EBIT by $31.6 million due to the fraud.

In addition to the fraud, Dana's financial statements from 2004 through the first two quarters of 2005 contained accounting errors amounting to $56.4 million. Dana failed to maintain accurate books and records. Dana also had materially deficient internal accounting controls that significantly contributed to the accounting irregularities and errors. As a result, Dana filed materially false and misleading periodic filings with the Commission for fiscal year 2004 and the first two quarters of 2005. In total, Dana materially overstated its EBIT by $88 million, or 73.9% of restated EBIT. This is equivalent to an overstatement of $43 million or 39.8% of restated net income, as reported in Dana's Form 10-K/A and Forms 10-Q/A filed in December 2005.  Dana Holding Corporation consented to the issuance of the Order without admitting or denying any of the findings in the Order.  In the Matter of Dana Holding Corporation

In a separate action, the SEC filed a settled civil action against four former employees of Dana Holding, Bernard Cole, William Hennessy, Douglas Hodge and Robert Steimle, in connection with the financial accounting fraud scheme that occurred from 2004 through the first two quarters of 2005.