The announcement by Hertz Global Holdings (HTZ) today of its need to the need to restate earnings as a result of accounting errors is almost certain to trigger a new SEC investigation; that is, if it hasn’t already. If/when that happens, don't count on the company to rush to tell you. Hertz’s behavior regarding its last disclosed SEC investigation left a lot to be desired.
Restatements of the multi-year accounting variety that surprise everyone are catnip to SEC enforcement officials. They can also easily be the result of pressure brought on by SEC comment letter exchanges or investigative activity, whether disclosed or not. Hertz has been investigated three other times in the past decade that we know about.
The record shows Hertz fully waited until Feb-2012 to disclose its last SEC investigation which it knew was formal as early as June-2011; a delay of 7 months. That matter pertained to the company’s proposed business combination with Dollar Thrifty Automotive Group, Inc.
In our opinion, waiting seven months to disclose a formal SEC investigation is inexcusable. It brings into question the overall quality of Hertz’s disclosures and whether investors can trust management.
Those with an interest in Hertz should insist the company speak to what, if any, communications it’s had with the SEC’s Division of Enforcement anytime in the past year. Ideally, the answer is none. But, again, we don’t expect it to stay that way.
Note: In our library we have 71 pages of documents from the formal Dollar Thrifty investigation of Hertz referenced above.