Hertz Accounting Fix Keeps CFO in Financial No-Man’s Land


May 15, 2015

Hertz Accounting Fix Keeps CFO in Financial No-Man’s Land


Billionaire activist investor Carl Icahn in 2014. Mr. Icahn controlss three board seets and owns 11% of Hertz, which still hasn’t finalized a financial restatement it disclosed over a year ago. Thomas Kennedy’s move from hotels to rental cars in December 2013 came with an unexpected twist.The finance chief came aboard Hertz Global Holdings Inc.HTZ +5.32% barely five months before it announced a restatement.

Hertz will ultimately restate results for the years 2011 through 2013.  But so far, 367 days have passed since it announced that it would restate results.

And yet, no restatements.

On Thursday the company disclosed it had again found additional errors that would add at least another $30 million to the non-cash charges. Hertz first disclosed accounting problems in May 2014, after it discovered problems that include the timing of write-downs of certain assets, the allowance for doubtful accounts in Brazil and uncollectible damages for rented vehicles.

Among restatements since 2011, just 20, including Hertz’s, entailed investigations that were pending for more than 170 days, according to research firm Audit Analytics, whichstudied 1,450 restatements back in November.

Nut-and-snacks-producer Diamond Foods Inc. currently holds the crown among actively-traded companies, at 379 days, according to Audit Analytics. But for those of you keeping score, Hertz will likely take the top spot in less than two weeks.

Hertz moved its headquarters to Florida from New Jersey, and former CFO Elyse Douglas left in late 2013 rather than relocate.

The company last held an annual meeting one year ago, and has yet to file proxy materials for its 2015 gathering of shareholders. By the middle of June the company will potentially be in violation of a little-known Delaware law that has been used by activists from time to time to force meetings and director elections.

Under the law, investors can sue Delaware-incorporated companies that go 13 months without holding a meeting, citing undue delay.

Billionaire Carl Icahn, for instance, sued Dell Inc.’s board in 2013 with an eye to force a meeting where he could supplant the board and derail its ultimately successful going-private transaction.

If Hertz passes 13 months without a meeting and attracts an activist looking to capitalize on a perceived weakness, however, it will find an ally in Mr. Icahn. Mr. Icahn owns 11% of Hertz and late last year installed three directors on the company’s board of directors, including two who were on the committee that selected former airline executive John Tague as chief executive in November.

The Hertz spokesman declined comment on its annual meeting. A spokeswoman for Mr. Icahn didn’t respond to a phone call.


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