Securities fraud complaint filed against Chrysler over Tipton County transmission plant

ken.delabastide@kokomotribune.com

An administrative complaint alleging civil securities fraud was filed Thursday against the Chrysler Corp., in relation to the bonds issued by Tipton County in 2008.

The Indiana Securities Division followed up on an investigation by the division with the complaint regarding the sale of bonds by Tipton County for the now bankrupt Getrag Transmission plant.

Chrysler was ordered to file a written answer to the complaint within 15 days and to appear at a hearing scheduled for 9 a.m. June 24 in the conference room of the Securities Division in Indianapolis.

According to the complaint, in September 2008, millions of dollars in bonds were issued by Tipton County to finance infrastructure improvements necessary to support the construction of the $530 million plant, which was a joint venture between Chrysler and Getrag Transmission LLC. The day after the bonds were issued, Chrysler disclosed it could not make guarantees to Getrag necessary for the German company to secure funding for the project.

Chrysler filed a lawsuit against Getrag for breach of contract and Getrag countersued. Last November, Getrag filed for Chapter 11 bankruptcy protection and canceled the project.

The complaint filed Thursday alleges that Chrysler committed civil securities fraud by failing to inform Tipton County of the lack of a complete agreement between Chrysler and Getrag in their joint venture to build the dual clutch transmission plant.

"Indiana has a long automotive manufacturing heritage, and we need to preserve it," said Secretary of State Todd Rokita. "But we also need to ensure a level playing field within all industries, and that includes protecting victims, whether they are individuals or groups like taxpayers in Tipton County."

The Indiana Securities Commissioner could order Chrysler to make restitution to Tipton County and pay fines and the cost of the investigation.

"We're happy that Secretary of State Rokita followed through with the complaint of securities fraud against Chrysler," Tipton County Commissioner Jane Harper said for the Board of County Commissioners. "Hopefully this brings [Chrysler] to the table. I hope we will be able to negotiate a resolution to this complaint."

Harper said she suspects if Chrysler settles with Tipton County, the complaint by the Securities Division will be dismissed.

The complaint comes at a vulnerable time for Chrysler, which is hoping to secure a second bridge loan from the administration of President Barack Obama to remain out of bankruptcy. The administration's auto task force has given Chrysler until April 30 to reach an agreement with Italian car make Fiat on a merger.

Congressman Dan Burton, R-5th District, is urging the administration not to approve any additional loans to Chrysler until the Tipton County issue is settled.

The complaint notes a commitment agreement signed by Chrysler on May 3, 2007, that states if the project wasn't completed Chrysler would be responsible for reimbursing Tipton County for all third-party costs.

Tipton County sold $11 million in bonds to Chrysler and Getrag and $4.2 million in bonds to Harris Bank and used $300,000 in Economic Development Income Tax (EDIT) funds to pay for infrastructure improvements at the plant site.

The county has filed a $14.1 million claim against Getrag in the bankruptcy case in a Michigan court.

Last month, Chrysler offered to relinquish the $5.5 million in bonds to Tipton County in exchange for the settling of all the claims by the county.

The Tipton County commissioners turned down the offer and contend that Chrysler is responsible for the $4.2 million in bonds sold to Harris Bank and the $300,000 from the EDIT tax.