Caesars Entertainment CEO Mark Frissora is being sued by his former employer, Hertz Global Holdings, for his alleged role in an accounting scandal that landed the rental car giant under federal investigation and forced it to restate several years of financial results.
The suit wants Frissora, former Hertz CFO Elyse Douglas and former General Counsel J. Jeffrey Zimmerman to pay back $70 million they received in incentive compensation, claiming they pressured employees to use fraudulent accounting techniques to inflate income and earnings.
Hertz stock tumbled in mid-2014 when the company disclosed it would have to restate results for the previous three years and cut its sales forecast. Frissora resigned that August amid pressure from investors, including financier Carl Icahn, the billionaire activist who has spent the last few months amassing a controlling stake in Caesars.
The restatements wound up costing Hertz more than $200 million and payments of $16 million to settle claims with the U.S. Securities and Exchange Commission, which determined that “improper methodologies were used to determine allowances and write-offs”. The stock has since plunged 85 percent, beset in the years after the scandal by falling used-vehicle prices and competition from internet-based ride-sharing companies.
In its suit for the $70 million in clawbacks Hertz accuses Frissora, Douglas and Zimmerman of “gross negligence and misconduct”.
The suit cites an internal board of directors’ investigation that concluded Frissora created a pressure-cooker work environment in which he leaned on subordinates to make “inappropriate accounting decisions’’ so the company could hit its financial targets. If it looked like Hertz might miss target, Frissora would “berate subordinates who did not come up with’’ non-traditional accounting approaches “to fill the gaps between Hertz’s actual and expected performance.”.
Douglas and Zimmerman are named in the action for failing to report Frissora’s alleged pressure tactics. The company is also demanding they return severance pay.
“I strongly disagree with the allegations,” Frissora said in an e-mailed statement to Bloomberg News. “I am proud of my record of integrity and transparency in business, and I am confident that these claims will be shown to be untrue.”
Frissora joined Hertz as CEO in 2006 and was named chairman the following year. He took the helm at Caesars in 2015 in the midst of a multibillion-dollar restructuring of the company’s debt in U.S. Bankruptcy Court. The reorganization was completed in October 2017.
Frissora tendered his resignation last November and is slated to depart this month.
Icahn and other activist investors are pressing for a sale of the casino giant.
