SEC Charges BorgWarner for Materially Misstating its Financial Statements

The Securities and Exchange Commission today announced settled charges against BorgWarner Inc., a motor vehicle parts manufacturer headquartered in Auburn Hills, Michigan, for materially misstating its financial statements by failing to account for certain asbestos liabilities. The SEC’s order finds that from 2012 to 2016, BorgWarner failed to report over $700 million in liabilities associated with future asbestos claims. According to the SEC’s order, BorgWarner did not conduct any substantive quantitative analysis to estimate these asbestos claims, despite possessing nearly 40 years of historical raw claims data. According to the order, BorgWarner erroneously relied on untested assumptions in concluding that it could not estimate its liabilities for these claims, including, for instance, that its products were unique among asbestos defendants and that industry benchmarks were inapplicable for purposes of calculating an estimate.