SEC: BMW to pay $18M penalty for inflating monthly sales figure

[GrussGott]

• SEC announces settlement of charges against BMW for disclosing inaccurate and misleading monthly retail sales volume to bond investors. The violating companies BMW AG, BMW NA and BMW US Capital agreed to pay a joint penalty of $18M.

• From 2015-2019, BMW inflated its reported retail sales in the U.S., which helped BMW close the gap between its actual retail sales volume and internal monthly sales target, according to SEC report.

• With inflated numbers, the company raised approximately $18B from investors in several corporate bond offerings.

• The order also finds that BMW NA paid dealers to inaccurately designate vehicles as demonstrators or loaners so that BMW would count them as having been sold to customers when have had not been.

[mkoesel]

Originally Posted by GrussGott

The violating companies BMW AG, BMW NA and BMW US Capital agreed to pay a joint penalty of $18M.

...

• With inflated numbers, the company raised approximately $18B from investors in several corporate bond offerings.

So then, in conclusion, the penalty for cheating is approximately 1/1000th of the resulting income. Got it.

[arashir]

Yikes with a penalty like that it's practically asking corporations to cheat. It's like you can't lose as long as you just cheat big enough

[Mavus]

SEC let's them raise 18B and then expects a few $$ for donuts and burgers

[BMWGirlFL]

https://www.sec.gov/litigation/admin/2020/33-10850.pdf

[davidr3]

18M for the 18B they got, what a deal

[GrussGott]

Originally Posted by mkoesel

So then, in conclusion, the penalty for cheating is approximately 1/1000th of the resulting income.

Exactly - it's like their pamphlet budget for Boise.

BMW: um, what? Ooo, ouch, yeah sure ok, whatevs

[Karmic Man]

A light pat on the shoulder...you naughty boy

[David70]

Originally Posted by mkoesel

So then, in conclusion, the penalty for cheating is approximately 1/1000th of the resulting income. Got it.

Originally Posted by davidr3

18M for the 18B they got, what a deal

They used inflated numbers in the process of issuing new bonds. Bonds are not profit but instead a way to raise money that is later repaid to the person that buys the bond. They still have to pay them back, they just get better terms/rates by showing better business numbers.

Extremely similar to you telling your bank your income was higher than it really was to get a better rate on your $200k home loan. As an example, you get a 3% rate instead of 4%. The $200k loan is not profit, the lower rate saves you a small part of the loan. Wouldn't make sense to give you a penalty anywhere close to $200k because of the slightly better rate you got.

[heavyD^2]

Originally Posted by David70

They used inflated numbers in the process of issuing new bonds. Bonds are not profit but instead a way to raise money that is later repaid to the person that buys the bond. They still have to pay them back, they just get better terms/rates by showing better business numbers.

Extremely similar to you telling your bank your income was higher than it really was to get a better rate on your $200k home loan. As an example, you get a 3% rate instead of 4%. The $200k loan is not profit, the lower rate saves you a small part of the loan.

It's still unethical though and I realize that most if not all large corporations at times use unethical practices. I've signed more than a few company ethics policies over my time and the hypocrisy is never lost on me.

[David70]

Originally Posted by heavyD^2

It's still unethical though and I realize that most if not all large corporations at times use unethical practices. I've signed more than a few company ethics policies over my time and the hypocrisy is never lost on me.

This was against SEC rules, not an ethical/unethical question, they did it, got caught and are paying a fine because of it.

I don't see the hypocrisy in what you sign, different groups continue to create and try to enforce rules and other groups continue to breaks rules and laws, some get caught. Not like the corporation is one person both creating and breaking the law.

[F32Fleet]

Surprised the mods haven't deleted this thread.
3---2---1

[F32Fleet]

Originally Posted by David70

They used inflated numbers in the process of issuing new bonds. Bonds are not profit but instead a way to raise money that is later repaid to the person that buys the bond. They still have to pay them back, they just get better terms/rates by showing better business numbers.

Extremely similar to you telling your bank your income was higher than it really was to get a better rate on your $200k home loan. As an example, you get a 3% rate instead of 4%. The $200k loan is not profit, the lower rate saves you a small part of the loan. Wouldn't make sense to give you a penalty anywhere close to $200k because of the slightly better rate you got.

Of course the kicker is that you personally (ex, Michael Cohen) could go to federal prison whereas a company just pays a fine.

[VisualEcho]

Well played BMW, well played.

[mkoesel]

Originally Posted by David70

They used inflated numbers in the process of issuing new bonds. Bonds are not profit but instead a way to raise money that is later repaid to the person that buys the bond. They still have to pay them back, they just get better terms/rates by showing better business numbers.

Fair enough. I just thought it was a little ironic and “funny”. It just seems like a pretty minor consequence. I’ll bet they came out ahead on the deal, which probably means others will risk the same outcome in the future. Oh well.

[BMWGirlFL]

Consideration of potential SEC issues may've just been overlooked in the "effort to publicly maintain a leading position relative to other premium automotive companies".

[GrussGott]

Originally Posted by mkoesel

Fair enough. I just thought it was a little ironic and “funny”. It just seems like a pretty minor consequence.

+1, the SEC isn't toothless, but they're pretty short on teeth.

[blackcoffee]

I wish I was surprised by the SEC's response, but I'm not. $18m isn't a deterrent to BMW or other automakers not pull this stunt again in the future. The only way to make corporations actually change their methods is to truly hurt them...and this isn't hurting.

[Artemis]

WSJ: https://www.wsj.com/articles/bmw-set...on-11600988637
("BMW Settles SEC Charges Over Sales Disclosures for $18 Million - Regulator says auto maker had provided inaccurate information regarding its U.S. retail sales")

"The regulator found that the Munich-based auto maker had provided inaccurate information regarding its U.S. retail sales while raising roughly $18 billion from bond investors. Between 2015 and 2019, BMW had boosted sales figures by having dealers register cars as sold when the vehicles were still on the lots, the SEC said. The practice is known in the U.S. as sales punching.
“Through its repeated disclosure failures, BMW misled investors about its U.S. retail sales performance and customer demand for BMW vehicles in the U.S. market while raising capital in the U.S.,” said SEC Enforcement Division Director Stephanie Avakian."

[The Choosey begger]

BMW didn't want to admit the huge grills are hurting sales. Haha

[MNR]

They're compensating now for the G80 sales figures

[Artemis]

Originally Posted by BMWGirlFL

Consideration of potential SEC issues may've just been overlooked in the "effort to publicly maintain a leading position relative to other premium automotive companies".

See also for example BMW Australia last Spring: here ("BMW Australia Registered Hundreds Of Demo Cars To Inflate Sales: Report") and here ("BMW bargains coming after hundreds of demo models get registered").

Lots of car companies inflate sales figures that way. Unhealthy, because making life even more difficult the subsequent year. In life there are good days and bad days, evolving with ups and downs, progress and setbacks. It's a flawed, unnatural reasoning to expect growth each year. Way too many variables as life and society moves on day after day, offering new challenges and opportunities.