Delphi gets court OK to issue subpoenas following tip of alleged investor trading and short-selling

By Caroline Salls

Pittsburgh, March 17 - Delphi Corp. received court approval to issue subpoenas to force production of information from some of its plan investors and other investors in connection with allegations of inappropriate trading or short-selling of Delphi securities by at least one of the investors involved in the plan consummation process.

According to the motion filed Monday with the U.S. Bankruptcy Court for the Southern District of New York, one of Delphi's stakeholders tipped the company off to the alleged misconduct.

Specifically, the company said "the stakeholder's information included allegations that one or more investors may have been trading in or shorting one or more of Delphi's outstanding public securities."

Delphi said it has also been advised that these investors may currently have material gains on these investments.

In addition, the company said it has been told that one or more of these investors might have communicated with Delphi's lead plan investor or its representatives about scenarios under which the company's equity purchase commitment would not be funded.

Although Delphi said it has no information that trading activity occurred using confidential information or that the lead plan investor participated in this trading, the company said "at least six investors have either acknowledged some short-selling activity or have refused to cooperate with the debtors' investigation" under a preliminary investigation.

Delphi did say none of the investors who directly signed the equity purchase commitment have refused to cooperate or have acknowledged significant short-selling activity for their own accounts except under an asserted contractual waiver and behind an ethical wall.

The company said it asked the court to step in and force production of the information because Delphi is unlikely to obtain the information through voluntary cooperation alone.

In addition to document production, the order also allows the company to issue subpoenas for the investors to submit to oral examinations.

The plan investors covered under the subpoena order include A-D Acquisition Holdings, LLC, Appaloosa Management, LP, Harbinger Del-Auto Investment Co., Ltd., Harbinger Capital Partners Special Situations GP, LLC, Harbinger Capital Partners Master Fund I, Ltd., Dolce Investments LLC, Cerberus Capital Management LP, Merrill Lynch, Pierce, Fenner & Smith Inc., UBS Securities LLC, UBS AG, Goldman, Sachs & Co. and Pardus DPH Holding LLC, Pardus Special Opportunities Master Fund LP, Pardus Capital Management LP and Pardus Capital Management LLC.

Delphi said the additional investors are transferees or assignees of rights or obligations under the equity purchase and commitment agreement.

The names of the additional investors have not been publicly disclosed.

Delphi is a Troy, Mich.-based automotive electronics manufacturer that filed for bankruptcy protection on Oct. 8, 2005. Its Chapter 11 case number is 05-44481.

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