April 12, 2013 (Shareholders Foundation ) - An investor who currently holds NYSE:NAV shares filed a lawsuit against certain directors of Navistar International Corp. over alleged breaches of fiduciary duties and waste of corporate assets. The plaintiff claims that the wrongdoing resulted in damage to Navistar’s reputation, goodwill, and standing the business community and has exposed the company to hundreds of millions of dollars in potential liability for violations of state and federal law.
The plaintiff alleges that certain directors are responsible for the company’s blatant failure to abide by U.S. governmental environmental regulations and that this failure to follow governmental regulation subjected the company to significant fines and penalties.

In 2001, the U.S. Environmental Protection Agency ( EPA ) drafted new, strict regulations on trucks that were set to go into effect in 2010, which, among other things, stated that no heavy-duty diesel engine could emit levels of nitrogen oxides higher than 0.20 g/bhp-hr. The two primary engine technologies that emerged to meet the new standards were Exhaust Gas Recirculation (“EGR”) and Selective Catalytic Reduction (“SCR”).

The plaintiff alleges that despite clear indications that EGR was not a viable method to achieve 0.20g NOx, certain defendants repeatedly claimed that Navistar International Corp. could develop an EGR engine that would be certified by the EPA.

The plaintiff says that although Navistar invested approximately $700 million on developing its proprietary Advanced EGR engine, it was later revealed that the Company had not even applied for certification of the EPA emissions standard (0.20g NOx) until early 2011, one year after the 2010 EPA Standards had become effective.

According to the complaint Navistar began using EPA credits it had previously earned to keep selling trucks and to stay in business but once the credits ran out, the Company then started paying a non-compliance fine for each truck it sold.

However, to conceal this fact from Navistar's investors and customers, certain defendants repeatedly stated that Navistar International Corp. had indeed achieved an engineering milestone and had an EPA-compliant EGR engine ready to be certified.

Then in July 2012, Navistar International Corp. shocked the market when the Company admitted its failure to achieve an EPA-compliant EGR engine. On August 2, 2012, Navistar issued a press release announcing that is was withdrawing its full-year fiscal 2012 guidance until the release of its third fiscal quarter 2012 results in September.

Furthermore, Navistar International Corp disclosed that it received a letter of inquiry from the Securities and Exchange Commision (“SEC”) involving an investigation of various accounting and disclosure matters dating back to November 2010.

Shares of Navistar International Corp (NYSE:NAV) declined from slightly over $70 in April 2011 to as low as $18.51 per share in October 2012.