Dive Brief:
- UPS agreed to pay the Securities and Exchange Commission $45 million to settle charges it overvalued UPS Freight before selling the LTL unit to TFI international in 2021, the SEC announced last month.
- The parcel carrier failed to follow generally accepted accounting practices and overvalued the unit at $2 billion, despite knowing it “was likely to sell for no more than about $650 million,” the SEC said. The unit ultimately sold for $800 million.
- TFI Chairman, President and CEO Alain Bédard wouldn’t weigh in on whether UPS’ alleged actions led his company to overpay. “I have no comments concerning this request,” he told Trucking Dive in an email.
Dive Insight:
The SEC investigation cited UPS for materially misrepresenting UPS Freight’s earnings ahead of the TFI deal.
Prior to the sale, an internal UPS analysis indicated that nearly $500 million of goodwill it had associated with the LTL unit was impaired. However, the company did not report the impairment and instead sought an outside consultant’s valuation without providing all necessary information, according to the SEC.
“Goodwill balances provide investors with valuable insight into whether companies are successfully operating the businesses they own,” said SEC Associate Director Melissa Hodgman in the announcement. “Therefore, it is essential for companies to prepare reliable fair value estimates and impair goodwill when required.
“UPS fell short of these obligations, repeatedly ignoring its own well-founded sale price estimates for Freight in favor of unreliable third-party valuations.”
Without the necessary information, the consultant’s valuation inflated UPS Freight’s worth by three times, the SEC said.
“The consultant relied on assumptions from UPS that were clearly not ones a prospective buyer would make,” the SEC’s announcement said.
UPS did not admit to or deny the SEC allegations, but in addition to the fine, it agreed to cease and desist from further violations of earnings reporting rules and requirements. It will also adopt trainings for certain officers, directors and employees, among other measures.
