SEC v. Daniel C. Ustian

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

        )
UNITED STATES SECURITIES AND       )
EXCHANGE            COMMISSION,                                                )
        )
Plaintiff,  ) Civil Action No. 16-cv-3885
                                                                                                                                                                        )
v.     ) Jury Trial Demanded
  )
DANIEL            C.            USTIAN,                                                                        )
     )
Defendant.                                                )
___________________________________________________ )

COMPLAINT

 Plaintiff, the United States Securities and Exchange Commission (“SEC” or
“Commission”), brings this action against Daniel C. Ustian (“Ustian” or the
“Defendant”) and alleges for its complaint against him as follows:

SUMMARY OF ALLEGATIONS
1. From late 2010 through 2012, Defendant Ustian, the then-President and
Chief Executive Officer of Navistar International Corporation (“Navistar”) led a
campaign of deception.  The deception was manifested in Ustian’s and Navistar’s
fraudulent statements to the public about Navistar’s ability to meet the Environmental
Protection Agency’s (“EPA”) deadline to comply with rigorous emission standards for
heavy-duty diesel truck engines.
2. These emission standards were not news to Navistar, a publicly-traded
truck, bus and diesel engine manufacturer headquartered in Lisle, Illinois.  The EPA had
issued the standards in 2001 to ultimately limit the discharge of nitrogen oxide or “NOx”

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emissions from on-road heavy-duty truck engines to 0.20 grams per brake horsepower
hour (the “0.20 NOx standard”).  The EPA, recognizing that the new standards would
require reconfigured engines, delayed compliance with the 0.20 NOx standard until 2010,
and allowed engine manufacturers to gradually step down NOx emissions levels over the
intervening years.
3. Under Ustian’s direction, Navistar sought to meet this challenge by
developing engines that utilized only “exhaust gas recirculation” or “EGR” technology.
EGR-only technology reduced NOx emissions by capturing a portion of exhaust gas,
which it cooled and blended with fresh air before returning the gas back into the engine’s
cylinder.
4. Within the company and publicly, Ustian trumpeted EGR-only technology
as important to Navistar’s financial success while relentlessly criticizing the alternative
technology adopted by Navistar’s competitors.  And he put Navistar’s money and
resources where his mouth was.  Under his watch, Navistar staked $700 million and tens
of thousands of hours of its engineers’ time on EGR-only technology.
5. By 2010 when the 0.20 NOx standard went into effect, Navistar had not
certified an EGR-only engine at the 0.20 NOx standard.  However, Navistar was able to
continue selling engines by using emission credits that Navistar had banked from its
previous sales of earlier generations of engines.
6. But as its limited stockpile of credits began to dwindle in 2011 and 2012,
Navistar was encountering significant engineering roadblocks in receiving EPA
certification of an EGR-only engine at the 0.20 NOx standard without compromising fuel
economy and performance.

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7. Given how critical EGR-only technology was to Navistar’s long-term
success, and Ustian’s professional reputation, Ustian needed more time to continue
development of a commercially viable 0.20 NOx EGR-only engine.  If the truth about the
increasingly difficult development and EPA certification process came to light, serious
consequences were likely to follow.  Navistar’s customers could defect, its stock price
could suffer, and it could be forced to abandon EGR-only technology altogether.
8. Rather than tell the public the truth and face these consequences, Ustian
engaged in a progressively desperate and fraudulent scheme to deceive the investing
public into believing that EPA certification of a competitive EGR-only engine that met
the 0.20 NOx standard was right around the corner.   The deception was manifested in
Ustian’s and Navistar’s statements in conference calls with analysts, in press releases,
and in reports filed with the SEC.
9. With Ustian’s knowledge, during 2011 and 2012 Navistar submitted three
applications to the EPA for certification of a heavy-duty diesel EGR-only engine at the
0.20 NOx standard.   Unknown to the investing public, the first such application included
an engine that Ustian knew Navistar could never sell — even if it were certified by the
EPA.  Ustian and Navistar filed this application anyhow to deceive the public about
Navistar’s progress in developing a certifiable and commercially competitive EGR-only
engine that met the 0.20 NOx standard.
10. Once it became clear that the EPA would not approve this first
application, Navistar followed up with two additional applications in 2012.  As Ustian
and Navistar knew, the EPA quickly made clear that these applications were also
deficient and unlikely to receive approval without significant modifications.

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11. As was well known to Ustian and Navistar, Navistar’s engineers were
having difficulty developing and certifying an EGR-only engine that could meet the 0.20
NOx standard without sacrificing fuel economy and other performance features,
discussions with the EPA were at an impasse, and Navistar’s applications were going
nowhere.
12. Nonetheless, from 2010 through 2012, instead of coming clean with the
public regarding the difficulties Navistar was experiencing in developing and certifying a
competitive EGR-only engine, Ustian engaged in a coverup.  During this period, Ustian
and Navistar made false and misleading public statements that led investors to believe
that Navistar’s efforts to produce a commercially competitive EGR-only engine meeting
the 0.20 NOx standard were proceeding without major engineering or EPA roadblocks.
13. By mid-2012, the costs and difficulties of development and certification of
the 0.20 NOx EGR-only engine became too great, Navistar’s stockpile of emissions
credits was running out, and the truth could no longer be suppressed.  In July 2012,
Navistar announced it was abandoning its EGR-only technology and adopting the
alternative technology used by Navistar’s competitors.  Navistar’s stock price
plummeted, and shortly thereafter its Board of Directors sought and secured Ustian’s
resignation.
14. Through the activities alleged in this Complaint, Ustian, directly or
indirectly, has engaged in transactions, acts, practices or courses of business which
constitute violations of Section 17(a) of the Securities Act of 1933 (“Securities Act”) [15
U.S.C. § 77q(a)] and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange

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Act”) [15 U.S.C. § 78j(b)] and Rule 10b-5 [17 C.F.R. § 240.10b-5] promulgated
thereunder.
15. Ustian also, directly or indirectly, has engaged in transactions, acts,
practices, and courses of business which constitute violations of Rule 13a-14 of the
Exchange Act [17 C.F.R. § 240.13a-14].
16. Additionally, Navistar directly or indirectly, has engaged in primary
violations of Sections 10(b) and 13(a) of the Exchange Act and Rules 10b-5, 12b-20,
13a-1, 13a-11 and 13a-13 promulgated thereunder, and Ustian aided and abetted and was
a control person for Navistar’s violations of these provisions.
17. Additionally, Navistar, directly or indirectly, has engaged in primary
violations of Section 17(a) of the Securities Act, and Ustian aided and abetted Navistar’s
violations of these provisions.
18. The SEC brings this action to restrain and enjoin such transactions, acts,
practices and courses of business pursuant to Sections 21(d) and 20(e) of the Exchange
Act [15 U.S.C. § 78u(d) and § 78t(e)] and Section 20(b) of the Securities Act [15 U.S.C.
§ 77t(b)].
19. The SEC seeks permanent injunctive relief against Ustian to enjoin him
from future violations of the federal securities laws, the imposition of disgorgement, with
prejudgment interest, civil penalties against Ustian, and an officer and director bar
against him.
JURISDICTION
20. The Commission brings this action pursuant to the authority conferred by
Section 20(b) of the Securities Act [15 U.S.C. § 77t(b)] and Section 21(d) of the

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Exchange Act [15 U.S.C. § 78u(d)], seeking to restrain and enjoin permanently the
Defendant from engaging in the acts, practices, transactions and courses of business
alleged herein, and for such other relief as may be appropriate.
21. This Court has jurisdiction over this action, and venue lies in this District,
pursuant to Sections 20(d) and 22(a) of the Securities Act [15 U.S.C. §§ 77t(d) and
77v(a)], and Sections 21(d) and 27 of the Exchange Act [15 U.S.C. §§78u(d) and 78aa].
The Defendant, directly or indirectly, singly or in concert, has made use of the means or
instruments of transportation or communication in, and the means or instrumentalities of,
interstate commerce, or of the mails, in connection with the transactions, acts, practices,
and courses of business alleged herein.  Some of these transactions, acts, practices and
courses of business occurred in the Northern District of Illinois, where the Defendant
transacted business and resided during the relevant period.
22. Defendant has, directly and indirectly, made use of the mails, and of the
means and instrumentalities of interstate commerce, in connection with the transactions,
acts, practices and courses of business alleged in this Complaint.
23. There is a reasonable likelihood that Defendant will, unless enjoined,
continue to engage in the transactions, acts, practices and courses of business set forth in
this Complaint, and transactions, acts, practices and courses of business of similar
purport and object.

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THE DEFENDANT
24. Daniel C. Ustian, age 65, was Navistar’s President and CEO from 2003
through August 2012; Chairman of the Board of Directors from 2004 through August
2012; and a director from 2002 through August 2012. Ustian also was the President of
Navistar’s Engine Group from 1999 through 2002 and Group Vice President and General
Manager of the Engine & Foundry Group of Navistar from 1993 through 1999.
RELATED PARTY
25. Navistar International Corporation is a Delaware corporation that
maintains its principal executive offices in Lisle, Illinois.  Navistar is an international
manufacturer of commercial and military trucks, buses and diesel engines and a provider
of service parts for trucks and trailers.  The Company’s stock is listed on the New York
Stock Exchange under the ticker symbol “NAV.”
FACTS
I. Navistar Develops an “EGR-Only” Technology Different from Its
Competitors’ Technologies

26.  In 2001, pursuant to the Clean Air Act, the EPA enacted a rule requiring
new heavy-duty diesel engines to meet the 0.20 NOx standard by 2010.  NOx is a
pollutant and reacts in the atmosphere to create smog and acid rain.  By delaying the
effective date of the rule requiring emissions at the 0.20 NOx standard until 2010, the
EPA gave the industry nine years to innovate the necessary new technologies.
27. To comply with the 0.20 NOx standard, Navistar and Ustian chose to rely
on EGR-only technology, which recirculates exhaust into the engine’s cylinders before
release, to reduce NOx emissions. This approach also was referred to as “in-cylinder”
technology.

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28. All of Navistar’s major competitors adopted an alternative technology
known as selective catalytic reduction (“SCR”), which involves chemically treating
exhaust before its release.
29. From 2001 through 2012, Navistar devoted tens of thousands of employee
hours and approximately $700 million to the development of its EGR-only technology.
As Navistar disclosed in its fiscal year 2010 annual report filed on Form 10-K,
“[f]ocusing on engine research and development in order to have a competitive advantage
using Exhaust Gas Recirculation (‘EGR’) and other technologies for compliance with
2010 emissions standards” was a key part of its long-term strategy.
30. Navistar’s decision to rely on EGR-only technology was a high-stakes bet
for the company and Ustian.  Although EGR-only technology offered the possibility of
significant advantages over SCR technology, successful commercial implementation of
EGR-only technology posed significant engineering challenges.
31. Nonetheless, at Ustian’s direction, Navistar did not prepare a back-up plan
in case it was ultimately unsuccessful in using EGR-only technology to meet EPA
emissions standards.  As Ustian stated at a September 15, 2009 conference attended by,
among others, securities analysts, “Plan B is we’re going to make Plan A work.”
32. To make that plan work, Navistar needed EPA approval of its EGR-only
engines.  A manufacturer of heavy-duty diesel engines in the United States, such as
Navistar, must obtain a certificate of conformity (“Certificate”) from the EPA each year
for each model of engine family that it sells.
33.  Using SCR technology, Navistar’s competitors had obtained Certificates
from the EPA by 2010 indicating that the engines they manufactured met the 0.20 NOx

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standard.  By 2010, Navistar had not even submitted an application for certification of a
heavy-duty diesel engine at the 0.20 NOx standard.
34. Navistar’s ability to develop and certify a commercially competitive
engine at the 0.20 NOx standard was important to Navistar’s customers and to Navistar’s
investors.
35. Ustian was actively involved in Navistar’s efforts to develop and obtain
certification of an EGR-only engine at the 0.20 NOx standard, including picking the
engineering team to work on the engine development, receiving updates from the
engineers and certification team on the engine’s development status and certification
status with the EPA, helping the team solve problems, and motivating the team.  From
2010 through 2012, Ustian regularly received updates from the engineering team, the
certification team and Navistar executives regarding both the status of development work
on Navistar’s EGR-only technology and Navistar’s communications with the EPA about
its applications for certification of an EGR-only engine at the 0.20 NOx standard.
II. Navistar Relies on Emissions Credits to Sell Engines While It Attempts to
Obtain EPA Certification

36. Prior to 2010, Navistar had produced engines with emissions that were
cleaner than required by the EPA.  This allowed Navistar to generate a “bank” of
emissions credits.  Under the EPA’s emissions credits system, Navistar could use these
emissions credits to sell engines at levels higher than the 0.20 NOx standard and, in turn,
gained more time to develop and certify an EGR-only engine at the 0.20 NOx standard.
37. Because Navistar did not have a Certificate for a 0.20 NOx engine when
the 0.20 NOx standard went into effect on January 1, 2010, Navistar continued to sell its

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engines certified at a NOx level higher than 0.20 NOx and used emissions credits to
offset the difference in NOx.
38. Once the 0.20 NOx standard went into effect, however, Navistar could no
longer generate additional emissions credits on engines with emissions higher than 0.20
NOx.  Thus, its bank of emissions credits was limited.
39. Navistar planned to seek EPA certification of its 13-liter EGR-only engine
at the 0.20 NOx standard first.  Once it obtained a Certificate for its 13-liter EGR-only
engine, Navistar then planned to apply that same technology to seek certification of its
other engines at the 0.20 NOx standard, including its 11-liter and 15-liter engines.   The
company planned to focus on certifying its 11-liter, 13-liter and 15-liter engines, known
at Navistar as the “big bore” engines, before moving onto other engine families because
it expected its emissions credits for the big bore engines to run out first.
40. While using its limited emissions credits, Navistar continued to try to
develop its EGR-only technology and obtain a Certificate for an engine at the 0.20 NOx
standard.  Navistar’s goal was to develop an EGR-only engine that emitted 0.20 NOx or
less and offered improved fuel economy, acceleration and power compared to the 0.50
NOx EGR-only engines Navistar was currently selling using emissions credits.  As of
late 2010, Navistar engineers and executives had informed Ustian that this 0.20 NOx
EGR-only engine with competitive performance features was not predicted to be ready
for production until at least the end of 2012.

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III. Navistar’s 2010 Registration Statement and Ustian’s 2011 Stock Sale
41. From 2010 through 2012, Navistar common stock was registered and
traded on the New York Stock Exchange.
42. Navistar filed a registration statement on April 23, 2010 to register shares
of common stock under its equity compensation plan.  Form S-8 registration statements
incorporate by reference certain prior filings and all subsequently filed periodic reports
until the company files a post-effective amendment terminating the offering, which
Navistar never did.  Navistar’s offering pursuant to this registration statement was
ongoing through the end of 2012.
43. Pursuant to this registration statement, Navistar issued stock-based
compensation to Ustian and its other executives, directors, and non-executive officers
between late 2010 and the summer of 2012.  Ustian sold Navistar stock on April 5, 2011.
IV. Ustian and Navistar Make Fraudulent Statements and Engage in Other
Deceptive Conduct

44. Beginning in late 2010, as investors, analysts, Navistar’s customers and
Navistar’s competitors questioned whether Navistar could ever develop and certify a
commercially competitive EGR-only engine at the 0.20 NOx standard, Ustian and
Navistar engaged in a fraudulent scheme to conceal from the public the significant
challenges Navistar was facing in developing and certifying a commercially competitive
EGR-only engine at the 0.20 NOx standard before its emissions credits ran out.  Through
his misstatements, Ustian repeatedly tried to reassure the public that Navistar’s EGR-only
engines could meet the 0.20 NOx standard while offering competitive performance
features, and that certification would occur before Navistar was at risk of running out of
emissions credits.  Ustian’s and Navistar’s fraudulent scheme was intended to hide from

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the public the serious issues Navistar was encountering in developing and certifying its
EGR-only engines.  This fraudulent scheme included the following:
A. November 2010 Press Release

45. On November 3, 2010, Navistar issued a press release regarding a facility
tour for media and securities analysts at the company’s Huntsville, Alabama engine plant
(the “November 2010 Press Release”).
46. Ustian reviewed, approved, and provided a quote for the November 2010
Press Release.
47. The November 2010 Press Release stated in pertinent part:
Navistar also advised that it has submitted certification to the EPA for its
MaxxForce 15 and plans to submit for EPA certification of its MaxxForce
13  at  0.2g  NOx  in  the  next  few  months,  far  ahead  of  when  high  volume
production of the 0.2g NOx-certified MaxxForce 13 would be required.

48. The “MaxxForce 15” that Navistar and Ustian referred to in the press
release was a 15-liter engine that Navistar was submitting for certification above 0.20
NOx.  Navistar had developed this engine to the point that it had competitive fuel
economy and other performance features compared to other 15-liter engines being sold in
the marketplace.  Because the MaxxForce 15 engine was competitive with other 15-liter
engines in the marketplace, Navistar and Ustian intended to, and ultimately did, sell this
engine upon certification from the EPA.
49. The “MaxxForce 13 at 0.2g NOx” that Navistar referred to in the press
release was a 13-liter engine that Navistar still was developing for certification at the
0.20 NOx standard using EGR-only technology.
50. This 13-liter engine lacked competitive fuel economy and other
performance features compared to other 13-liter engines being sold in the marketplace.

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51. Because the MaxxForce 13 lacked performance features competitive with
other 13-liter engines, Ustian knew that even if the EPA issued a Certificate for the
engine, Navistar could not sell the engine in the marketplace.
52.  In the context of a discussion otherwise devoted to engines being sold, or
intended to be sold, in the marketplace, the November 2010 Press Release referenced a
certification application for a 13-liter engine at the 0.20 NOx standard.  In fact, Navistar
and Ustian knew, but did not disclose, that unlike the other engine referenced in the press
release, Navistar could not produce and sell that 13-liter engine in the marketplace even
if the EPA issued a Certificate for it because Navistar had not yet developed its EGR-
only technology to the point that in the next few months it could obtain certification at
the 0.20 NOx standard while also offering competitive performance features.
B. December 2010 Analyst Conference Call

53. On December 22, 2010, Ustian and other Navistar executives conducted a
conference call with securities analysts (the “December 2010 Analyst Call”) in
conjunction with Navistar’s filing of its fiscal year 2010 annual report on Form 10-K.
54. It was Navistar’s general practice to conduct conference calls with
securities analysts in conjunction with Navistar’s filing of its quarterly and annual reports
with the SEC.  As a general matter, the securities analysts participating in these calls
periodically made recommendations to clients and others about whether to buy or sell
Navistar stock. Further, although Navistar directed the contents of these calls towards
securities analysts, Navistar permitted the investing public to listen to the calls by dialing
the number that Navistar published for the calls.

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55. During the December 2010 Analyst Call, a securities analyst asked in
pertinent part: “[O]n the 13 liter in terms of certifying that at 0.2, what kind of timeline
do you think we are looking at there?” Ustian responded in pertinent part:
[W]e will submit that over the next couple of months I believe. . . . [W]e
would be able to show you the data that it meets 0.2 and show you how we
are able to meet it. But as far as the customers, he is not going to know the
difference. Nothing looks any different.

Later during the call, another securities analyst asked Ustian in pertinent part: “Dan, can
you talk about the fuel efficiency of your 13-liter 0.2 NOx versus an equivalent SCR 0.2
NOx engine? Do you anticipate running those comparisons?” Ustian responded in
pertinent part:
The fuel economy of the 0.2 will be better and there will be no change in
heat rejection at the same time. So this product will be even better.

When the analyst followed up with a question about whether this engine would be “better
than an equivalent SCR 0.2 NOx,” Ustian responded:
Well, our strategy has been we will be equal to any SCR – the best of any
SCR product that is out there. So we are assuming the SCR product gets a
little better too, and that is what we are going to be able to do with getting
to 0.2.

56. Ustian deceived investors through his statements that the EGR-only
engine that Navistar planned to submit to the EPA in the next few months offered better
fuel economy and performance features than either Navistar’s current 0.50 NOx engines
or its competitors’ SCR engines.  Ustian knew, but did not disclose, that as of the time he
made these statements on December 22, 2010, Navistar’s 13-liter engine was not yet
capable of limiting emissions to 0.20 NOx while also offering “better” fuel economy and
other performance features than Navistar’s competitors’ SCR engines or even fuel
economy and other performance features equal to Navistar’s existing 0.50 NOx engines

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such that the customer would not “know the difference.”  Ustian also knew, but did not
disclose, that Navistar would not be able to offer these advancements in fuel economy
and performance in “the next couple of months” and thus would not be able to submit a
certification application to the EPA in the next couple of months for a 13-liter 0.20 NOx
EGR-only engine with competitive performance features that could be produced and sold
in the marketplace.
 C. 2011 Certification Application
57. On February 21, 2011, Navistar submitted an application to the EPA for
certification of a 13-liter engine at the 0.20 NOx standard using Navistar’s EGR-only
technology (the “2011 Application”).  Ustian was aware of Navistar’s 2011 Application
to the EPA and was regularly updated on the development and certification work for the
2011 Application both before and after it was submitted to the EPA.  Internally at
Navistar, this application was associated with Ustian and was referred to at Navistar as
“D-cert,” for “Dan-certification.”
58. At the time the 2011 Application was submitted to the EPA, Ustian knew
that the 13-liter engine described in the 2011 Application could not be sold in the
marketplace even if the EPA issued a Certificate for it.  Ustian knew that this engine
required further development work to attain the fuel economy and performance features
necessary to make it a usable, competitive engine when installed in a truck and to make it
an engine Navistar could sell.
59. It was unusual, if not unprecedented, for Navistar to submit a certification
application to the EPA knowing that the engine that was the subject of the application
could not be sold in the marketplace even if a Certificate were granted.

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60. In fact, at the time the 2011 Application was submitted to the EPA, the
engine described in the application could run only in the testing laboratory.  In a
February 9, 2011 email regarding the engine covered by the 2011 Application, a Navistar
Senior Technical Specialist working on certification matters told other engineers in the
certification group:
I  asked  a  bigger  question.  Would  this  engine  ever  be  drivable  in  a  truck
and I got laughs in response. . . .  Translation you have a[n] underpowered
13  liter  engine  that  is  coughing,  sputtering  and  wheezing  like  some
terminal cancer patient on a respirator.

61. At the time the 2011 Application was submitted to the EPA, Ustian also
knew that the Application was incomplete and that the EPA told Navistar it would not
issue a Certificate without Navistar providing additional test results.  In the months
before the 2011 Application was submitted to the EPA, the EPA told Navistar it would
not accept Navistar’s use of test results from its current 0.50 NOx engine to satisfy
durability testing requirements, known as Deterioration Factor testing, for its proposed
0.20 NOx engine because significant differences existed between the two engines.
62. Despite the EPA expressly stating that it would not accept Navistar’s use
of its 0.50 NOx engine Deterioration Factor test results in its 2011 Application, Navistar
submitted the 2011 Application without conducting new Deterioration Factor testing.  As
Navistar’s Chief Certification Engineer stated in a February 21, 2011 email that was
forwarded to Ustian the same day that the 2011 Application was submitted to the EPA,
“Durability data and results from the current [0.50 NOx] engine were used in the
submittal despite EPA disallowing that version of durability demonstration.”
63. Ustian knew that the D-cert engine described in the 2011 Application
lacked performance features to be a competitive, usable engine in a truck and that the

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engine could not be put into production even if certified.   For example, Navistar’s
Director of Advanced Technology told Navistar executives in a March 1, 2011 email,
[I]t has been made very clear in the reviews that I have been in that the D-
Cert  power  curve  is  not  drive-able  or  saleable  so  we  need  to  be  very
careful in how things are described to the reporter.

When Navistar’s Vice President of Powertrain Product Development forwarded this
email to Navistar’s Vice President of Integrated Product Development and suggested he
talk with Ustian about these issues with the D-cert engine, the Vice President of
Integrated Product Development responded that Ustian “totally knows it” and advised
him to “[t]ell these guys to not worry about this sh[--] and not keep sending emails to
each other.”
64. Navistar submitted the 2011 Application to the EPA despite the fact that
Navistar never intended to sell the engine described in the application and the fact that
the 2011 Application did not have new Deterioration Factor testing results, which the
EPA told Navistar were required for a Certificate.   Because the 2011 Application lacked
new Deterioration Factor testing, Ustian knew the EPA was unlikely to issue a
Certificate.   Further, because the D-cert engine described in the 2011 Application was
not even drivable in a truck, Ustian knew that Navistar would never sell this engine.  In
spite of these issues, Navistar submitted the 2011 Application because Ustian wanted to
use it as a marketing tool to convince investors of Navistar’s supposed progress in
developing an EGR-only engine at the 0.20 NOx standard while it continued to work on
developing an engine with competitive performance features that it could put into
production.

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65. In the weeks after Navistar submitted the 2011 Application, the EPA
responded to the 2011 Application and advised Navistar that the application did not meet
the EPA’s certification requirements.  Among other concerns, the EPA continued to insist
that Navistar run new Deterioration Factor testing.  During spring 2011, Navistar
engineers questioned whether they could run a Deterioration Factor test on the engine
that was the subject of the 2011 Application without the engine experiencing component
failure.
66. By submitting the 2011 Application to the EPA for certification of an
engine that could not be driven or sold and through Navistar’s and Ustian’s public
statements about it described in paragraphs 47, 55, 70, 73 and 75 through 76, Ustian and
Navistar created the misleading impression that Navistar had successfully developed an
EGR-only engine that met the 0.20 NOx standard while attaining competitive
performance features.  In fact, as Ustian knew, Navistar’s EGR-only engine was not
drivable if installed in a truck, lacked competitive performance features, could not be
sold in the marketplace even if certified by the EPA and did not meet the EPA’s
certification requirements.
67. Analysts and investors were misled by Navistar’s submission of the 2011
Application because they understood Navistar’s and Ustian’s statements regarding the
engine covered by the 2011 Application, and the fact that Navistar had submitted the
application, to mean that Navistar currently had a 13-liter EGR-only engine with
competitive fuel economy and other performance features that could meet the 0.20 NOx
standard and that Navistar could sell the engine in the marketplace if the EPA certified it.
Analysts and investors did not know that the engine described in the 2011 Application

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was not drivable when installed in a truck and could not be put into production even if
the EPA certified it.
68. Analysts and investors were also misled because they believed that the
2011 Application was a complete application that included the information necessary for
the EPA to approve it.  Analysts and investors did not know that the 2011 Application
was incomplete and lacked necessary testing, including new Deterioration Factor testing
that the EPA expressly told Navistar was required before the 2011 Application was
submitted.
 D. March 2011 Analyst Conference Call

69. On March 9, 2011, Ustian and other Navistar executives conducted a
conference call with securities analysts (the “March 2011 Analyst Call”) in conjunction
with Navistar’s filing of its first quarter 2011 quarterly report on Form 10-Q.
70. During the March 2011 Analyst Call, before taking any questions from
securities analysts, Ustian addressed Navistar’s 2011 Application, stating in pertinent
part:
Now  let’s  talk  about  in-cylinder  0.2.  One  of  our  challenges,  perhaps  as
difficult a challenge as the technology itself, was the marketing side of our
solution, which is in-cylinder. Since we were the only ones out there, there
is a lot coming at us with this can’t work and, of course, now we are out in
the  marketplace  and  that’s  over.  That  argument  is  over.  We  are  out  there
in the marketplace. We are exceeding what we had committed to in terms
of performance and fuel economy and all that. So that’s over.

We want to get in front of the 0.2 now, because we can anticipate there is
a  next  one  coming  out  that  0.2  can’t  be  done.  So  what  we  did  is  we
submitted to the EPA a certification of 0.2 to take that argument away. We
don’t  plan  on  using  this  for  awhile,  but  we  are  going  to  have  it  out  there
on the shelf that says it can be done and we can meet the standards and get
all  of  the  performance  features,  as  well.  So  [t]hat’s  what  we  have  done.
When  you  hear  about  that,  it’s  not  that  it’s  coming  into  production
tomorrow. It’s just to get it out there and take all that argument away.

20

71. Ustian’s statement that that the engine covered by the 2011 Application
would be “out there on the shelf that says it can be done and we can meet the standards
and get all of the performance features, as well” was false.  Ustian knew, but did not
disclose, that the engine covered by the 2011 Application (the engine that was “on the
shelf”) did not meet the EPA’s certification requirements and did not yet offer
competitive performance features.  In fact, Ustian knew, but did not disclose, that the
engine covered by the 2011 Application not only lacked competitive performance
features, it was not drivable or sellable.
72. Additionally, Ustian deceived investors through his misleading
statements, “When you hear about that, it’s not that it’s coming into production
tomorrow.  It’s just to get it out there and take all that argument away.”  Ustian knew, but
did not disclose, that Navistar could not put the engine covered by the 2011 Application
into production even if certified because it was not drivable and did not offer competitive
fuel economy and other performance features that would allow Navistar to sell the engine
in the marketplace.
  E. April 2011 Press Release
73. On April 5, 2011, Navistar issued a press release (the “April 2011 Press
Release”) with the headline “Navistar Receives EPA Certification for MaxxForce DT
Mid-Range Diesel Engine at 0.39g NOx” and the sub-headline “With EPA and CARB
[California Air Resources Board] Certification of MaxxForce® 15, Submission of
MaxxForce® 13 at 0.2g NOx, Company Continues to Make Strides in its In-Cylinder
Emissions Technology Path.”

21
74.  Ustian reviewed and approved the April 2011 Press Release before
Navistar issued it.
75. In the April 2011 Press Release, Navistar announced that it had received
certification for two engines at levels higher than the 0.20 NOx standard: a mid-range
diesel engine and a 15-liter engine, the “MaxxForce 15.”  Navistar intended to, and did
eventually, sell both of these engines in the marketplace upon certification from the EPA
using emissions credits.
76. In the April 2011 Press Release, Navistar then addressed its 2011
Application, stating:
In  addition,  Navistar  also  recently  submitted  its  MaxxForce  13  at  0.20g
NOx  for  EPA  certification,  once  again  reiterating  its  prime  technology
path in meeting the 0.20g NOx standard through in-cylinder technologies.
The  company  intends  to  phase-in  its  engines  at  progressively  lower
emissions  levels  (0.4g  NOx,  0.35g  NOx,  0.3g  NOx,  0.25g  NOx,  etc.)  in
the years ahead in an effort to make emissions compliance as seamless as
possible to its customers.

77. In the context of a discussion otherwise devoted to applications and
Certificates for engines being sold, or intended to be sold, in the marketplace, the April
2011 Press Release referenced the 2011 Application for certification of a 13-liter engine.
In fact, Navistar and Ustian knew but did not disclose that, unlike the other engines
referenced in the press release, the engine described in the 2011 Application did not meet
the EPA’s requirements for certification and could not be put into production even if
certified because it needed extensive development work before it would be drivable or
could offer competitive performance features to be sold.

22
78. The EPA never approved the 2011 Application.  Later in 2011, Navistar,
with Ustian’s input and approval, abandoned efforts to gain approval of the 2011
Application.
79. It was unusual, if not unprecedented, for Navistar to abandon a
certification application to the EPA after the EPA failed to approve the application, as
Navistar did with the 2011 Application.
F. Navistar’s Projected Depletion of its Emission Credits
80. By fall 2011, Navistar and Ustian learned that Navistar’s emissions credits
for its big bore engines could be depleted as early as February 2012.  Without emissions
credits or an engine certified at the 0.20 NOx standard, Navistar would be unable to
legally sell engines from its big bore line unless the EPA instituted rule-making to allow
Navistar to pay non-conformance penalties (“NCPs”).
81. NCPs are monetary penalties that allow a vehicle or engine manufacturer
to sell engines that do not meet the emissions standards.  When the EPA institutes rule-
making for NCPs, manufacturers unable to comply with the applicable standard may
choose to pay NCPs, which are assessed on a per-engine basis.
82. Only 40 states permit the use of NCPs.  If the EPA instituted rule-making
to allow Navistar to pay NCPs, Navistar could do so in those 40 states but would have to
use its emissions credits in the other 10 states.  This would allow Navistar to conserve its
emissions credits for its big bore engines and extend the anticipated depletion date
beyond the February 2012 projection.
83. In fall 2011, Navistar communicated with the EPA about its credit status
for its big bore engines and its timing for development of a 0.20 NOx big bore EGR-only

23
engine.  Ustian was aware of these communications and participated in some of them.
Navistar and Ustian informed the EPA that Navistar would be unable to obtain
certification of a big bore 0.20 NOx engine by the time it expected to use its remaining
emissions credits in February 2012.
84. As an alternative to paying NCPs, Navistar proposed that the EPA allow it
to recalibrate the software on its current 0.50 NOx engine to reduce emissions to 0.20
NOx in a testing laboratory.  Navistar explained that this recalibration would only reduce
emissions to 0.20 NOx in a lab; when the engine was driving in a truck on the highway,
its emissions would be higher than 0.20 NOx.  The EPA rejected this proposal.
85. Consequently, the EPA continued to work on an interim NCP rule, which
ultimately went into effect in January 2012, to allow Navistar to pay NCPs while it
continued to try to obtain a Certificate for an EGR-only engine at the 0.20 NOx standard.
Ustian was aware that the EPA was promulgating an interim NCP rule because the EPA
understood that Navistar could not obtain certification of a big bore EGR-only engine at
the 0.20 NOx standard before Navistar expected its big bore emissions credits to run out.
86. Navistar engineers continued to encounter significant obstacles in
developing a 0.20 NOx EGR-only engine with improved performance features.  As of fall
2011, Navistar’s engineers projected, and Ustian knew, that it would take until at least
fall 2013 before a 0.20 NOx EGR-only engine with improved performance features
would be ready to go into production.
G. Navistar Develops a Bridge Program Engine
87. In late 2011, Navistar began work on certifying another 13-liter EGR-only
engine at the 0.20 NOx standard that would bridge the gap between when Navistar’s big

24
bore emissions credits ran out and its 0.20 NOx big bore EGR-only engines with
improved fuel economy and other performance features were expected to be ready for
production in the fall of 2013.  Ustian knew this.
88. This second engine for certification at the 0.20 NOx standard, the bridge
program engine, involved no hardware changes and no goals to improve fuel economy,
acceleration or other performance features.   Instead, Navistar engineers planned to
recalibrate Navistar’s current 0.50 NOx EGR-only engines to reduce emissions in the
testing laboratory to 0.20 NOx.   This recalibrated engine would include only software
changes.  Ustian was aware of this bridge program to achieve certification of an EGR-
only engine at the 0.20 NOx standard.
89. This bridge program engine used a technology known as dual mapping.  In
the dual mapping technology used in the bridge program engine, the engine would
operate under one calibration, called Map A, while in emissions testing in a laboratory,
and would switch to another calibration, called Map B, when it sensed that the vehicle
was in motion (anything above 0.1 miles per hour).  The engine could meet emissions
requirements while operating in Map A but had severely reduced fuel economy and
performance.  To address this problem, the engine would switch to Map B as soon as the
vehicle was out of idle, which improved fuel economy and performance but resulted in
emissions significantly above 0.20 NOx.
H. December 2011 Annual Report
90. On December 20, 2011, Navistar filed its annual report for its fiscal year
2011 on Form 10-K (the “December 2011 Annual Report”) through the SEC’s publicly-
available EDGAR document filing system.

25
91. Ustian reviewed and approved the December 2011 Annual Report before
Navistar filed it.  He also signed and certified the December 2011 Annual Report in his
capacity as Navistar’s President and CEO.
92. Navistar employees met with the EPA on December 16, 2011, four days
before Navistar filed its December 2011 Annual Report.  During that meeting, Navistar
discussed its plans to submit in early 2012 a second application for certification of a 13-
liter engine at the 0.20 NOx standard using Navistar’s EGR-only technology.   Navistar
engineers described how this proposed 0.20 NOx engine operated, including its dual
mapping technology.  During the meeting, the EPA told Navistar that an engine using a
dual mapping strategy in the manner described by Navistar would not meet EPA
standards.
93. On December 16, 2011, immediately after meeting with Navistar, an EPA
official emailed Navistar’s Vice President of Government Relations, who attended the
meeting, with “important takeaways from the meeting,” including:
First  as  we  discussed,  under  the  Clean  Air  Act  and  our  regulations  EPA
can not [sic] issue a certificate (conditional or otherwise) unless the engine
meets  the  [three  certification]  requirements.    The  engine  described  today
by  the  Navistar  team  for  certification  in February [2012] does not appear
to meet these requirements.

94. Ustian received a copy of this email on December 16, 2011.
95. In Navistar’s December 2011 Annual Report, which Navistar filed on
December 20, 2011, just four days after its December 16, 2011 meeting with the EPA,
Navistar stated in pertinent part:
We plan to submit certification applications to both EPA and CARB in the
near future. We believe that our engines meet both agencies’ certification
requirements.  We  are  engaged  in  ongoing  discussions  with  officials  from
both  EPA  and  CARB  regarding  potential  regulatory  solutions  that  would

26
permit  us  to  continue  uninterrupted  production  of  all  of  our  engines.  We
cannot  predict  the  outcome  of  these  discussions  nor  the  effect  they  may
have  on  our  business  or  financial  condition,  results  of  operation  or  cash
flows.

96. When Navistar discussed in the December 2011 Annual Report its plans to
submit a certification application to the EPA, Navistar was referring to the certification
application for the 13-liter engine that Navistar had described to the EPA in the meeting
on December 16, 2011.
97. The December 2011 Annual Report deceived investors through its
misleading statement, “We plan to submit certification applications to both EPA and
CARB in the near future. We believe that our engines meet both agencies’ certification
requirements.”  Navistar and Ustian knew, but did not disclose, that just four days earlier,
the EPA had informed Navistar that it took the opposite view:  the engine for which
Navistar was preparing to submit its new certification application did not appear to meet
the EPA’s certification requirements.  They also knew, but did not disclose, that Navistar
would not be able to make all the changes the EPA said were required before submitting
a new application.  For example, Navistar’s engine would continue to use dual mapping
technology to keep emissions below the 0.20 NOx standard during emissions testing in a
laboratory but above the 0.20 NOx standard when a vehicle was in motion.  Navistar’s
statements in the December 2011 Annual Report conflicted with what the EPA had told
Navistar, and Navistar had conveyed to Ustian, regarding its certification proposal just
four days earlier.  Any interpretation to the contrary by Ustian of the EPA’s feedback was
highly unreasonable.
98. Additionally, the December 2011 Annual Report stated in pertinent part,
in its “Risk Factors”:

27
Our  solutions  for  meeting  U.S.  federal  and  state  emissions  requirements
may not be successful or may be more costly than planned.

In light of Navistar’s difficulties in developing a 0.20 NOx engine that offered
competitive performance features, the EPA’s failure to approve Navistar’s 2011
Application, and the EPA’s expression to Navistar of the agency’s concerns about
Navistar’s proposed second application, Ustian knew that Navistar already had
experienced a lack of success with its EGR-only technology.  Navistar’s statements in the
December 2011 Annual Report conflicted with what the EPA had told Navistar, and
Navistar had conveyed to Ustian, regarding its certification proposal just four days
earlier.  Any interpretation to the contrary by Ustian of the EPA’s feedback was highly
unreasonable.
I. Navistar Submits a Second Certification Application to the EPA

99. On January 31, 2012, Navistar submitted a second application to the EPA
for certification of a 13-liter engine at the 0.20 NOx standard using EGR-only technology
(the “January 2012 Application”).
100. Ustian was aware of Navistar’s submission of the January 2012
Application and was regularly updated on the development and certification work for the
January 2012 Application both before and after it was submitted to the EPA.
101. The EGR-only engine described in the January 2012 Application included
dual mapping technology that required the engine to switch between Map A and Map B
while in operation.   During testing or in idle, the engine operated in Map A.  When the
speed increased to 0.1 miles per hour (whenever it was in motion), an Auxiliary
Emissions Control Device (“AECD”), which Navistar called the Safe Operating Mode

28
AECD, would engage and switch the engine to Map B, during which the engine would
operate with emissions above 0.20 NOx.
102. On February 1, 2012, the day after Navistar submitted its January 2012
Application, during an analyst conference, Ustian compared the fuel economy and other
performance features of Navistar’s 13-liter EGR-only engine for certification at the 0.20
NOx standard to the 0.50 NOx EGR-only engines Navistar was already selling, stating in
pertinent part:
But,  as  far  as  the  customer  sees  on  0.2,  he  will  not  know  the  difference.
That  has  always  been  the  plan,  and  we  are  able  to  produce  that  now.
Invisible.  No impact on fuel economy, no impact on performance.

103. On February 17, 2012, the EPA provided Navistar with a written response
to Navistar’s January 2012 Application.  The EPA’s written response included an email
from the EPA to Navistar and a five-page attachment to the email with the EPA’s
preliminary concerns on the January 2012 Application.
104. Ustian was aware of the EPA’s February 17, 2012 response on or about
the date on which Navistar received it.
105. The EPA’s February 17, 2012 email in response to Navistar’s January
2012 Application stated in pertinent part:
After  reviewing  your  application,  our  preliminary  view  is  that  Navistar’s
application  for  a  certificate  of  conformity  raises  several  serious  concerns
that  would  need  to  be  discussed  and  resolved  before  a  decision  could  be
made to approve the application.

106. A five-page attachment to the email outlined the EPA’s concerns and set
forth what additional information and changes to the engine or testing protocol the EPA
likely would need from Navistar before it could approve the January 2012 Application.

29
107. One of the concerns identified by the EPA in its February 2012 response
was whether Navistar met the 0.20 NOx standard on two certification tests.  The EPA
told Navistar:
[These two certification tests] appear to have been conducted without the
Safe    Mode    Operation    AECD    active.        However,    based    on    our
understanding  of  this  AECD,  it  would  be  active  in-use  .  .  .  .  When
activated,  this  AECD  switches  to  a  high  NOx  calibration  which  exceeds
the [Not To Exceed] limit over the entire engine operating map. Therefore,
this engine family could not possibly comply with the NOx standard over
the  [two  tests].  .  .  .    We  should  discuss  whether  and  how  the  procedures
should   appropriately   be   changed   to   result   in   more   representative
measurements.    For  example,  Navistar  could  demonstrate  that  the  engine
complies  over  all  test  cycles  with  the  AECD  active  as  it  would  be  under
operating conditions typical of the cycles.

108. The EPA also expressed concern that Navistar’s Safe Operating Mode
AECD might be a “defeat device,” or a prohibited strategy that “reduces the effectiveness
of the emission control system under conditions which may reasonably be expected to be
encountered in normal vehicle operation and use.”  The EPA asked Navistar to justify
why its Safe Operating Mode AECD was not a defeat device, given that “the only time
the strategy would not be active is in the emissions test cell,” and “[i]n effect the AECD
appears to largely disable the emission control system during almost all in-use
operation.”
109. Additional concerns that the EPA outlined in this email attachment related
to some of the same issues, such as the lack of new Deterioration Factor testing, that the
EPA had raised with Navistar in 2011 when the EPA told Navistar that it believed that
Navistar’s 2011 Application did not meet the EPA’s certification requirements.

30
J. Navistar Engages Lobbyists and Contacts Elected Officials to
Pressure the EPA to Approve Its Certification Application

110. Shortly after receiving the EPA’s response, Ustian directed his staff to
reach out to elected officials and their staffs regarding the challenges Navistar was facing
in obtaining EPA certification of an EGR-only engine at the 0.20 NOx standard.   Ustian
directed his staff to reach out to the elected officials and their staffs because he thought
the EPA certification process in which Navistar was engaged was proving to be a lot
tougher than it had been for Navistar in the past and was requiring more time and
resources.
111. On February 27, 2012, Navistar provided the EPA with an eight-page
written reply and asked that its application be approved immediately.   Navistar’s reply
included challenges to the EPA’s interpretation of its regulations.  Navistar submitted no
new testing results and made no changes to its certification testing protocol or to the
engine covered by the January 2012 Application in response to the EPA’s February 17,
2012 response.
112. After receiving Navistar’s reply, the EPA never indicated to Navistar that
it agreed with any of Navistar’s arguments or that its positions on Navistar’s January
2012 Application had changed from those it set forth in its February 17, 2012 response.
113. On March 6, 2012, a Navistar employee in Government Relations
contacted an elected official’s staff to schedule a meeting to discuss Navistar’s efforts to
gain certification of an EGR-only engine at the 0.20 NOx standard.
114. Navistar and Ustian also engaged lobbying firms and public relations
firms to assist with their efforts to obtain certification of an EGR-only engine at the 0.20
NOx standard.   On March 7, 2012, a public relations firm consultant sent Navistar’s

31
Chief Communications Officer “our ideas on how to put on a full court press for the U.S.
EPA to approve our .2 engine.”  The list included outreach to numerous elected officials
at the state and federal levels “to encourage EPA certification of the .2 engine.”
115. Navistar had never hired lobbyists or public relations firms to contact
elected officials or their staff members regarding EPA certification of any other pending
certification application prior to its January 2012 Application.
K. March 2012 Quarterly Report and Press Release
116. On March 8, 2012, Navistar filed its quarterly report for its first fiscal
quarter of 2012 on Form 10-Q (the “March 2012 Quarterly Report”) through the SEC’s
publicly-available EDGAR document filing system.
117. Ustian reviewed and approved the March 2012 Quarterly Report before
Navistar filed it.  He also signed and certified the March 2012 Quarterly Report in his
capacity as Navistar’s President and CEO.
118. The March 2012 Quarterly Report stated in pertinent part:
We reached a number of key milestones during the quarter that we believe
will  contribute  to  our  long-term,  strategic  profitability  goals.  Advanced
Exhaust  Gas  Recirculation  (“EGR”),  combined  with  other  strategies,  is
our  solution  to  meet  ongoing  emissions  requirements.    We  formally
submitted  our  0.2g  NOx  in-cylinder  engine  certification  data  for  our  13L
engine to the United States Environmental Protection Agency (“EPA”) on
January  31,  2012,  and  to  the  California  Air  Resources  Board  (“CARB”)
on February 17, 2012 (collectively, our “0.2g NOx Engine Submission”).
These  submissions  are  under  review  by  EPA  and  CARB  and  we  are
engaged in ongoing discussions relating to our engine certification.

119. On March 8, 2012, Navistar also issued and filed a press release regarding
its results for its first fiscal quarter of 2012 (the “March 2012 Press Release”).
120. Ustian also reviewed and approved, and provided a quote for, the March
2012 Press Release before Navistar issued and filed it.

32
121. In Ustian’s quote for the March 2012 Press Release, he stated:
Strategically, we achieved a number of key milestones in the first quarter,
including our submission of a 0.2 NOx engine for EPA certification . . . .

122. The March 2012 Quarterly Report and the March 2012 Press Release
deceived investors when they stated that Navistar’s January 2012 Application was among
the “milestones” that Navistar had achieved in the first quarter and when the March 2012
Quarterly Report stated that this application would “contribute” to Navistar’s “long-term
strategic profitability goals.”  In fact, Navistar and Ustian knew, but did not disclose, that
Navistar already had experienced a lack of success regarding its EGR-only solution for
certification of an engine at the 0.20 NOx standard.  They also knew, but did not disclose,
that the EPA did not approve the 2011 Application and had told Navistar it would not
accept aspects of the engine described in the January 2012 Application, such as the way
Navistar’s dual mapping technology operated and Navistar’s lack of new Deterioration
Factor test results.  Additionally, Ustian’s assessment was that the EPA certification
process was proving to be a lot tougher for Navistar and was requiring more time and
resources than it had in the past.  Navistar’s statements in the March 2012 Quarterly
Report and Ustian’s quote in the March 2012 Press Release conflicted with what the
EPA had told Navistar, and Navistar had conveyed to Ustian, regarding its January 2012
Application.  Any interpretation to the contrary by Ustian of the EPA’s feedback was
highly unreasonable.
L. March 2012 Analyst Conference Call

123. On March 8, 2012, Ustian and other Navistar executives conducted a
conference call with securities analysts and the investing public (the “March 2012

33
Analyst Call”) in conjunction with Navistar’s filing of its first quarter 2012 quarterly
report on Form 10-Q.
124. Before taking questions from analysts during the call, Navistar disclosed
that as part of Navistar’s revised fiscal year 2012 earnings guidance, Navistar now was
estimating that it would pay $25 million in NCPs during the fiscal year and that certain
warranty charges would impact Navistar’s financial performance.
125. Later during the call, an analyst asked: “[T]hanks for the clarification on
the $25 million NCP hit. Dan, could you . . .  let us know how many months you are
assuming the NCP payments continue for that $25 million hit?”  Ustian responded:
[H]ere’s maybe a way to look at it. We have submitted for the .2 and that
goes through a process of – typically, that’s about three months, I think, is
about the average of that. When we get the certification, it still takes some
time for us to get to production on this. So what we are doing right now is
getting ready to go to production, and it will be about June before we can
get into production with that particular engine. So that kind of gives you a
framework of where it would be. As for the preciseness of it, we can’t tell
you, but our objective is to be in production on that in June.

126. In Ustian’s response, he was referring to Navistar’s January 2012
Application for certification of a 13-liter EGR-only engine at the 0.20 NOx standard and
Navistar’s anticipated production of that engine after receiving a Certificate from the
EPA.
127. Later during the call, another analyst asked: “[S]o it sounds like most of
these warranty issues are all engine calibrations. Is it reasonable to assume that as you
launch out the .2 engine that this [sic] potential for this to reoccur?” Ustian responded:
Well,  I  think  that  is  a  good  question  ...    This  is  why  we  are  taking  until
June to go to production with it so that won’t happen, but I think that’s a
fair question and we are doing the actions to prevent that from happening.

34
128. Ustian misled investors and analysts through the March 2012 Analyst Call
by stating that Navistar was “taking until June” to go to production of a 13-liter EGR-
only engine that would be certified at the 0.20 NOx standard and aimed “to be in
production on that in June,” based on a “typical” certification process timeline of “about
three months” from the date the certification application was submitted.  In fact, Ustian
knew, but did not disclose, that the certification process for the January 2012 Application
was not typical, that the EPA had raised serious concerns about the application that
Navistar had not yet resolved despite devoting more time and work than usual to the
development and certification processes, and that Navistar and Ustian had concerns that
certification might not occur in time for production in June.  Ustian’s statements during
the March 2012 Analyst Call conflicted with what the EPA had told Navistar, and
Navistar had conveyed to Ustian, regarding its January 2012 Application.  Any
interpretation to the contrary by Ustian of the EPA’s feedback was highly unreasonable.
129. Following Navistar’s March 2012 Analyst Call and March 2012 Quarterly
Report, Ustian and Navistar received analyst reports showing that investors were in fact
misled by their statements and demonstrating that their misstatements were highly
material.  For example, one analyst noted in a March 9, 2012 report:
The company expects to get the EPA 13L certification sometime in April-
May 2012, and further expects the 13L engine production to begin by June
2012.  .  .  .  Our  expectation  is  that  NAV  should  be  able  to  get  the  EPA
certifications for 13L shortly . . . .

130. Similarly, another analyst noted in a March 9, 2012 report:
The  company  is  targeting  June  for  a  switch  over  to  producing  fully
compliant 13L engines.  We expect the current fine guidance is protecting
against  (normal)  delays  in  the  certification  process.  .  .  .  We  expect  the
catalysts to drive the shares to begin in 2Q (with EPA certification) . . . .

35
M.  Ustian’s Lobbying Efforts
131. In March 2012, Navistar executives arranged for Ustian to meet with an
elected official to ask the elected official to assist Navistar in obtaining EPA certification
of Navistar’s EGR-only engines. Ustian’s meeting with the elected official was part of a
broader effort by Navistar and Ustian to lobby public officials for assistance in obtaining
a Certificate from the EPA for an EGR-only engine at the 0.20 NOx standard.
132. On March 28, 2012, Ustian met with the elected official. Ustian told the
elected official that Navistar had “struggled” to get an engine certified at the 0.20 NOx
standard and that it was at a “stalemate” with the EPA.   Ustian also told the elected
official that as a result of the EPA’s failure to certify a Navistar engine at the 0.20 NOx
standard, Navistar was “getting to the point where we can’t ship product.”
N. The EPA Continues to Raise Concerns Regarding Navistar’s
Certification Application

133. Throughout March and April 2012, the EPA advised Navistar that it
continued to have concerns about Navistar’s January 2012 Application.  The EPA
repeatedly reiterated that it could not certify Navistar’s engine if it was designed to meet
the 0.20 NOx standard only in a testing laboratory and not in-use on the road.  For
example, in a March 23, 2012 email that Ustian received, the EPA reiterated that “[y]ou
cannot have one emissions control configuration for taking an EPA compliance test and a
different emission control configuration for installation in a vehicle, if the differences
result in measurements that are not representative of the in-use configuration.”
134. Navistar engineers expressed skepticism that Navistar’s EGR-only engine
could ever limit emissions to 0.20 NOx while in-use and also offer the competitive
performance features that would make it a marketable engine.  Following an April 5,

36
2012 meeting with the EPA discussing Navistar’s efforts to certify an EGR-only engine
at the 0.20 NOx standard, Navistar’s General Manager of Powertrain Product
Development, who was the lead engineer for the 0.20 NOx development programs,
described the engine in the January 2012 Application as “FUBAR forget about it!” based
on the EPA’s feedback.
O. Navistar Engineers Begin Work on a New Engine for Certification,
and Navistar Withdraws Its January 2012 Application

135. Following the April 5, 2012 EPA meeting, Navistar engineers worked on
technical changes to the EGR-only engine described in the January 2012 Application that
would result in a new certification application.  One such change was a new feature to
replace the Safe Operating Mode AECD.  While different from the Safe Operating Mode
AECD, this new feature continued to use dual mapping technology that resulted in the
engine’s NOx emissions being higher when it was in a vehicle in motion on the road than
when it was stationary in a laboratory.  The technical changes to lower emissions came at
the expense of fuel economy and other aspects of the engine’s performance, such as
acceleration.
136. Navistar employees and the EPA met on April 27, 2012 to discuss
Navistar’s changes to its EGR-only engine to receive certification at the 0.20 NOx
standard.  During this meeting, Navistar informed the EPA of the technical changes it
made to the engine and the resulting decrease in fuel economy and performance in this
engine.
137. As of May 2012, Ustian knew that any additional changes to the engine
that the EPA might require to certify it at the 0.20 NOx standard would result in
unacceptable performance trade-offs or require so much time for additional development

37
work that Navistar would run out of emissions credits before it could receive
certification.
138. On May 10, 2012, Navistar withdrew its January 2012 Application.  It was
unusual, if not unprecedented, for Navistar to formally withdraw an application for EPA
certification of an engine.
P. Navistar Engages More Lobbyists and Public Relations Firms to
Pressure the EPA to Certify its Engine

139. In early May 2012, Navistar engaged additional lobbyists and public
relations firms to provide messaging advice and to contact federal and state elected
officials and their staffs regarding Navistar’s efforts to obtain certification of an EGR-
only engine at the 0.20 NOx standard.
140. In a May 10, 2012 phone call with one of the public relations firms
assisting with Navistar’s efforts to obtain certification of an EGR-only engine at the 0.20
NOx standard, according to notes from one of the public relations consultants on the call,
Navistar’s Vice President of Government Relations stated in pertinent part:
In response to feedback from [an EPA official], our engineers completely
revised   the   calibrations   for   our   engine   and   it   drastically   reduced
emissions,  but  it  requires  that  we  take  a  hit  in  fuel  economy.    We  need
certification  for  our  engine  in  May.    We  will  be  announcing  our  second
quarter earnings on June 5th, and we need to be able to say by then what
the agency is doing, so we need the go-ahead from the EPA this month.

141. On May 10, 2012, Navistar’s Chief Communications Officer emailed two
public relations firms talking points that were being prepared for the lobbyists to use
when contacting elected officials and their staff members.  The talking points identified a
“devastating chain of events [that] will unfold – starting immediately” if the EPA did not
grant certification, including,

38
It  is  likely  that  a  denial  of  certification  would  become  immediate  news.
Additionally,  Navistar  will  report  2
nd
  quarter  earnings  the  first  week  of
June  and  its  10K  [sic]  financial  filing  MUST  include  a  description  about
the  status  of  .2  certification.    The  reaction  of  the  financial  marketplace
will be swift and deep, exposing the company to myriad financial crises.

(Emphasis in original).  Other predicted consequences of Navistar not receiving
certification of an engine at the 0.20 NOx standard included the inability to sell its
products in certain states, significant employee layoffs, and the possibility that “[t]he
company either disappears or is acquired by one of its FOREIGN competitors.”
(Emphasis in original). The talking points proposed as the “specific ask” that elected
officials use “your immediate influence to have higher-level EPA officials assist [an EPA
official] with granting Navistar .2 certification.”
142. Throughout May 2012, lobbyists and public relations firms engaged by
Navistar contacted numerous elected officials at the state and federal levels and their staff
members regarding Navistar’s efforts to certify an EGR-only engine at the 0.20 NOx
standard.
Q. Navistar Submits a Third Certification Application to the EPA
143. On May 21, 2012, Navistar submitted another application for certification
of a 13-liter EGR-only engine at the 0.20 NOx standard (the “May 2012 Application”).
144. Ustian was aware of Navistar’s submission of the May 2012 Application
to the EPA and was regularly updated on the development and certification work for the
May 2012 Application both before and after it was submitted to the EPA.
145. Navistar estimated internally that its May 2012 Application engine had
worse fuel economy than its January 2012 Application engine.  Further, the May 2012
Application engine had worse fuel economy than 13-liter engines employing SCR

39
technology that were already being sold in the marketplace by its competitors.  Ustian
knew these facts.
146. As of May 2012, Ustian knew based on updates from the engineers that
Navistar’s EGR-only engine with improved fuel economy and other performance features
— the engine Navistar had been developing for years and that pre-dated the bridge
program engine that was the subject of the January 2012 Application and the May 2012
Application — was not expected to be ready for production until at least late 2013.
Navistar projected it would run out of big bore emissions credits before then, however.
147. In May 2012, Navistar also was projecting that the engine covered by its
May 2012 Application would not be ready for production for several more months.  On
May 24, 2012, Navistar’s Vice President of Government Relations sent the EPA a letter
justifying Navistar’s continued need for NCPs.  In the letter, Navistar informed the EPA:
Even  were  EPA  to  approve  Navistar’s  one  13  liter  application  tomorrow,
it  would  still  take  Navistar  several  months  to  be  able  to  ship  road-ready
engines covered by the application.

(Emphasis in original.)
148. Navistar employees met with the EPA on May 30, 2012 and June 4, 2012
to discuss the May 2012 Application.   Between these meetings, Navistar sent the EPA
requested testing data and information on the engine described in its May 2012
Application, including data showing the engine’s NOx emissions when it operated in
Map A and when it operated in Map B.
149. During the June 4, 2012 meeting, the EPA told Navistar that the EPA
continued to have serious concerns about Navistar’s May 2012 Application.  The
concerns the EPA discussed included some of the same concerns that the EPA had raised

40
with Navistar regarding the January 2012 Application, such as the concern that this
engine limited emissions to 0.20 NOx during testing in a laboratory but operated above
the 0.20 NOx standard when in-use on the road.
150. At the June 4, 2012 meeting, the EPA discussed Navistar withdrawing the
May 2012 Application and NCPs being Navistar’s only option going forward.   As the
meeting took place, Navistar’s lead engineer on the project, who was in attendance at the
meeting, sent emails to both his supervisor and a colleague stating that the EPA’s
response was “unequivocally NO!” to Navistar’s May 2012 Application.
151. Immediately after leaving the June 4, 2012 EPA meeting, Navistar’s Vice
President of Government Relations, who attended the June 4, 2012 EPA meeting, called
Ustian to update him on what happened at the meeting.  After he finished talking to
Ustian, Navistar’s Vice President of Government Relations updated other attendees at the
June 4, 2012 EPA meeting about his call with Ustian.  After that update, Navistar’s lead
engineer sent an email (in the same e-mail chain discussed in paragraph 150) to his
supervisor and a colleague informing them:
Dan put the gag order on us.  We are only allowed to say “the agency has
heard   everything   and   will   reply   with   a   written   summary.”      Please
disregard my previous communication.

152. Following the June 4, 2012 meeting, the Navistar attendees sent emails
summarizing the EPA’s feedback at the meeting.  On the night of June 4, 2012,
Navistar’s Chief Certification Engineer sent an email to his colleagues describing their
discussions with the EPA earlier that day, including that the EPA’s “major concern is the
.2g design does not follow CfR [sic] part 1065.10.  In-use must produce emissions same
as regulatory test cycles.”  Navistar’s lead engineer on the 0.20 NOx engine development

41
sent an email to his colleagues on June 5, 2012 indicating that the EPA viewed the engine
described in Navistar’s May 2012 Application as a “blatant attempt to circumvent the
regulations.”
153. On June 5, 2012, Navistar’s Vice President of Government Relations, who
attended the June 4 meeting, emailed an EPA official, stating in pertinent part:
[W]e  appreciated  the  opportunity  to  review  with  you  and  satisfactorily
answer   the   remaining   questions   that   you   had   on   our   certification
yesterday.  At  the  conclusion  of  the  meeting  we  were  surprised  by  your
comments. We would like to submit questions to you based on yesterdays
[sic]  dialogue  and  request  that  you  not  take  any  further  action  on  our  .2
certification request until we receive a response to these questions.

154. Within hours of receiving the email, the EPA official responded in an
email, stating in pertinent part:
As I said yesterday, based on the information provided, I believe that your
engine  is  unlikely  to  receive  a  certificate  of  conformity  as  it  is  currently
designed . . . As we made clear previously, 40 CFR 1065.10 requires that
engines  be  tested  in  a  manner  that  would  result  in  emissions  rates
equivalent to those that would result using the same engine configuration
installed  in  a  vehicle.    For  this  engine  [described  in  the  May  2012
application], that emission result is 0.42g/hp-hr not 0.20g/hp-hr.

155. Ustian received a copy of this email from the EPA on June 5, 2012.
R. June 2012 Quarterly Report
156. On June 7, 2012 — two days after Navistar and Ustian received the June
5, 2012 email from the EPA — Navistar filed its quarterly report for its second fiscal
quarter of 2012 on Form 10-Q (the “June 2012 Quarterly Report”) through the SEC’s
publicly-available EDGAR document filing system.
157. Ustian reviewed and approved the June 2012 Quarterly Report before
Navistar filed it.  He also signed and certified the Quarterly Report in his capacity as
Navistar’s President and CEO.

42
158. The June 2012 Quarterly Report stated in pertinent part:
We   submitted   to   the   EPA   an   application   for   a   0.20g   NOx   engine
certificate  for  one  13L  engine  family  on  January  31,  2012  and  we
submitted  a  similar  application  to  CARB  on  February  17,  2012,  but  later
withdrew  both  applications.  In  response  to  certain  concerns  raised  by  the
EPA, on May 21, 2012, we submitted a revised application to the EPA and
plan to submit a revised application to CARB. Certain issues raised by the
revised  application  are  under  review  by  the  EPA,  and  we  are  engaged  in
ongoing discussions relating to certification of this engine family at 0.20g
NOx.

159. The June 2012 Quarterly Report deceived investors by stating that “in
response to certain concerns raised by the EPA” Navistar submitted the May 2012
Application and that certain “issues” raised by the revised application merely were
“under review.”   In fact, just days earlier, in response to the May 2012 Application, the
EPA had informed Navistar and Ustian that Navistar’s engine was unlikely to receive
certification based on the engine’s current design.  Navistar and Ustian knew that any
additional changes to the engine to address the EPA’s concerns would result in
unacceptable performance trade-offs or require so much time for additional development
work that Navistar would run out of emissions credits before it could receive
certification.  Navistar’s statements in the June 2012 Quarterly Report conflicted with
what the EPA had told Navistar, and Navistar had conveyed to Ustian, regarding its May
2012 Application.  Any interpretation to the contrary by Ustian of the EPA’s feedback
was highly unreasonable.
S. June 2012 Analyst Conference Call
160. On June 7, 2012, Ustian and other Navistar executives conducted a
conference call with securities analysts and the investing public (the “June 2012 Analyst

43
Call”) in conjunction with Navistar’s filing of its second quarter 2012 quarterly report on
Form 10-Q.
161. Before taking questions from analysts, Ustian stated in pertinent part:
We  have  submitted,  as  we  spoke  to  you  before  about,  an  application  for
certification on our Class 8 engine family, and we are continuing to work
with the EPA on that. EPA is at – for those of you that have followed us –
also  has  an  NCP  rule  that  they  are  finalizing.  Frankly,  we  don’t  want  to
use  that.  We  want  to  get  our  0.2  certification  behind  us  and  not  use  the
NCP, but that is a backup that the EPA is working on. On the other hand,
we are also getting ready as soon as that certification is approved we can
go to instant production within 30 days. So, we have all the mechanisms in
place to respond quickly once we get that certification approved.

162. When Ustian referred to “an application for certification on our Class 8
engine family,” he was referring to the May 2012 Application for certification of a 13-
liter EGR-only engine at the 0.20 NOx standard.
163. Later in the call, an analyst asked: “[W]e will start with EPA engine
certification. You said in your Q that you resubmitted that, I think, in May. Do we have
any idea what the difference [is] between what you submitted in February and what you
submitted in May? And what are your views on when and if this thing gets approved?
And how much of that is built into your second-half forecast, which is just a massive
sequential improvement?”  Ustian responded:
Let’s define what we did there. In working with the EPA, they asked us if
there  was  some  spots  that  they  wanted  us  to  modify,  and  so  we  did  that.
And  we’ve  been  running  tests  on  that  to  make  sure  they  meet  all  the
requirements,   not   just   of   the   EPA   but   our   own   requirements   on
performance,  et  cetera.  And  so  we  resubmitted  that  back  to  them  and
we’re  in  the  process  now  of  working  with  them  on  getting  that  certified.
So  there’s  where  that  stands.  Of  course,  it’s  hard  for  us  since  it  is
somewhat out of our control to tell you exactly the timing of any of that so
I hope you can appreciate that. But that’s the process we’re in right now.

44
The analyst followed-up with another question: “Last time we were talking about this
you said it would be three to four months for the approval process. Does that clock start
again now in May?”  Ustian responded in pertinent part:
No, of course not. Again, it’s somewhat out of our control. But no, there is
plenty of background out there now that it shouldn’t take nearly as long. I
could  argue  we  should  have  been  done  with  this,  but  we  are  not.  So  we
have  to  go  forward  and  get  it  done  expeditiously.  And  we’re  all  over  the
top of this every minute of every day, as you can imagine. And so now we
are in that process.

164. Ustian deceived investors through his misleading statements on the June
2012 Analyst Call that “[i]n working with the EPA, they asked us if there was some spots
we wanted to modify, and so we did that. . . . And so we resubmitted that back to them
and we’re in the process now of working with them on getting that certified.  So that’s
where that stands.”   Ustian’s statements indicated that Navistar had made all of the
modifications the EPA said were required for certification and that he was unaware of
any facts indicating that the EPA would not approve its application.  In fact, the EPA had
just told Navistar and Ustian days before the June 2012 Analyst Call that the May 2012
Application was unlikely to be approved based upon the current design of the engine.
Ustian knew, but did not disclose, that Navistar had not made all of the changes the EPA
said were required for certification.  Ustian also knew, but did not disclose, that that any
additional changes to the engine to address the EPA’s concerns would result in
unacceptable performance trade-offs or require so much time for additional development
work that Navistar would run out of emissions credits before it could receive
certification.  Ustian’s statements in the June 2012 Analyst Call conflicted with what the
EPA had told Navistar, and Navistar had conveyed to Ustian, regarding its May 2012

45
Application.  Any interpretation to the contrary by Ustian of the EPA’s feedback was
highly unreasonable.
165. Ustian also deceived investors through his misleading statements during
the June 2012 Analyst Call that “we’ve been running tests on that to make sure they meet
all the requirements, not just of the EPA but our own requirements on performance, et
cetera.” Ustian knew, but did not disclose, that Navistar had made technical changes to
the engine that sacrificed fuel economy and other performance features in the engine,
making the engine’s fuel economy and other performance features worse than Navistar’s
existing 0.50 NOx engines.  By telling investors that Navistar was running tests to make
sure the engine met not only the EPA’s requirements but “our own requirements on
performance, et cetera,” Ustian misled investors into believing that the engine described
in the May 2012 Application was commercially competitive when Ustian knew it had a
degradation in fuel economy and performance compared to Navistar’s current EGR-only
engines.  His statement was particularly misleading given the company’s previous
statements, including those on February 1, 2012, about the fuel economy and other
performance features that its 0.20 NOx engines would have.
166. Ustian also deceived investors through his misleading statements on the
June 2012 Analyst Call regarding the timing of certification, such as “as soon as that
certification is approved we can go into instant production within 30 days,” his assertion
that the certification clock did not restart in May — “No, of course not” —, “there is
plenty of background out there now that it shouldn’t take nearly as long” and “we have to
go forward and get it done expeditiously.  And we’re all over the top of this every minute
of every day, as you can imagine.”  In fact, Ustian knew, but did not disclose, that the

46
EPA would not approve the engine described in the May 2012 Application as it was
currently designed, and he was aware that any additional changes to the engine to address
the EPA’s concerns would either result in unacceptable performance trade-offs or require
substantial time for additional development work.  Ustian’s statements in the June 2012
Analyst Call conflicted with what the EPA had told Navistar, and Navistar had conveyed
to Ustian, regarding its May 2012 Application.  Any interpretation to the contrary by
Ustian of the EPA’s feedback was highly unreasonable.
167.  Ustian’s statement, “We want to get our 0.2 certification behind us and
not use the NCP, but that is a backup that the EPA is working on.  On the other hand, we
are also getting ready as soon as that certification is approved we can go into instant
production within 30 days” was false.  Ustian knew, but did not disclose, that if
certification were granted immediately, Navistar could not go into production on the
engine covered by the May 2012 Application within 30 days.  In fact, his statement
directly contradicted Navistar’s representation to the EPA on May 24, 2012 that it would
“still take Navistar several months to be able to ship road-ready engines” even if
certification happened the next day.  Thus, his statement that Navistar “can go into
instant production within 30 days was false.”  Additionally, he also deceived investors by
tying the “instant production” claim directly to concerns about the company’s continued
payment of NCPs.  His statement that Navistar wanted to “not use the NCP” and that it
was only “a backup” was misleading.  As the company stated in its May 24, 2012 letter to
the EPA, even if certification were awarded the next day, Navistar still would need to pay
NCPs while it prepared its engines for production.

47
168. Following Navistar’s June 2012 Analyst Call and June 2012 Quarterly
Report, Ustian and Navistar received analyst reports showing that investors were in fact
misled by their statements and demonstrating that their misstatements were highly
material.  For example, one analyst noted in a June 12, 2012 report:
We believe that . . . the 13L 2010 EPA certification should happen soon. .
.  .    We  are  maintaining  our  OUTPERFORM  rating  due  to  NAV’s  low
valuation.  The year 2012 will likely continue to be a messy period due to
uncertainty and delay in the transition to EPA compliance.  However, EPA
compliance  should  soon  get  resolved.  .  .  .    Management  commented  that
due  to  some  concerns  raised  by  the  EPA,  NAV  “resubmitted  data”  for
certification  of  its  13L  engines  to  the  EPA  again  on  May  21,  2012.
Management  expects  to  get  the  certification  soon,  however,  the  expected
delay is still unclear.

T.  Navistar  Discusses  Switching  to  SCR  and  Continues  to
Receive Negative Feedback from the EPA

169. In the days immediately following the June 2012 Conference Call,
Navistar engineers and Navistar senior executives advocated for Ustian to agree to
transition to an emissions solution that used SCR technology to meet the 0.20 NOx
standard.   On June 8, 2012, Navistar’s Director of Finance in Global Product
Development sent Navistar’s Chief Financial Officer an analysis of the financial
ramifications of using SCR technology to meet the 0.20 NOx standard.   On June 10,
2012, Navistar’s Vice President of Integrated Product Development emailed other
Navistar executives:
*Please   don’t   forward*   I   talked   to   [Navistar’s   Vice   President   of
Government  Relations]  at  length  this  AM.    He  wants  to  use  our  political
clout to convince EPA to give us time/break so that we can do SCR.  He
does not think that EPA will give us a cert on [the May 2012 application].
He  is  very  very  concerned  and  thinking  the  same  way  as  the  rest  of  the
team.

48
170. During a meeting with the Executive Committee of Navistar’s Board of
Directors held on June 11, 2012, Ustian discussed a “Plan B” for an emissions solution,
including the use of SCR technology to meet the 0.20 NOx standard.
171. On June 15, 2012, the EPA provided Navistar with a written response to
Navistar’s May 2012 Application.
172. The EPA’s written response included an email from the EPA to Navistar
and an eight-page attachment to the email.
173. Ustian received a copy of the EPA’s written response on June 15, 2012.
174. The EPA’s June 15, 2012 response to Navistar’s May 2012 Application
stated in pertinent part:
After  reviewing  your  application,  our  view  is  that  Navistar’s  application
for  a  certificate  of  conformity  raises  several  serious  concerns  that  would
prevent EPA from being able to grant a certificate of conformity.

175. The eight-page attachment to the email outlined the EPA’s concerns and
set forth what additional information the EPA believed it likely would need from
Navistar regarding the application.  The concerns set forth in the EPA’s June 15, 2012
response were the same concerns raised by the EPA at the June 4, 2012 meeting.
176. One concern identified by the EPA in its June 15, 2012 response related to
Navistar’s test results on the two tests that the EPA had raised concerns about in response
to the January 2012 Application.  In its June 15, 2012 response, the EPA stated in
pertinent part:
With  Map  B  active,  NOx  emissions  over  both  test  cycles  exceed  the
applicable NOx standard by 60 to 115 percent. . . .  In this case, it appears
that  testing  without  Map  B  active  results  in  unrepresentative  emissions
measurements  [on  these  two  tests  and  on  a  third  laboratory  test].      The
current   Map   A   and   Map   B   design   results   in   compliance   with   the
applicable NOx emission standard only in the test cell and not in-use.  The

49
Map  B  emissions  appear  to  be  very  similar  to  Navistar’s  calibration  for
[its 0.50 NOx engines].

The EPA also informed Navistar that it was assessing whether the feature that switched
the engine from Map A to Map B when the engine was moving “raises potential concerns
with regard to the prohibition on defeat devices.”
177. Another of the concerns raised by the EPA in its June 15, 2012 response
related to the lack of new Deterioration Factor testing.
V.   Navistar’s Transition to SCR Technology and Ustian’s Departure
178. By July 2012, Navistar had failed to obtain an EPA Certificate for an
EGR-only engine that met the 0.20 NOx standard.   On July 6, 2012, Navistar announced
that it would transition to a new emissions solution that incorporated SCR technology to
meet the 0.20 NOx standard.
179. On the day of Navistar’s announcement of its transition to SCR
technology, its stock price closed more than 15 percent lower than its closing price on the
previous day.
180. In August 2012, Navistar asked Ustian to resign from the company after
the company’s failure to obtain EPA certification at the 0.20 NOx standard for an engine
using the EGR-only technology that Ustian had so aggressively championed.  The Board
of Directors asked Ustian to resign because they did not believe Ustian was capable of
leading Navistar in the development of products using SCR technology.

50
COUNT I

Violations of Section 10(b) of the Exchange Act [15 U.S.C. §78j(b)]
and Rule 10b-5 [17 C.F.R. 240.10b-5] thereunder

181. The SEC realleges and incorporates by reference the allegations set forth
in paragraphs 1 through 180 above.
182. By virtue of the conduct alleged herein, Ustian, directly or indirectly,
singly or in concert with others, by use of the means or instrumentalities of interstate
commerce, or by the use of the mails, or of the facilities of a national securities exchange,
in connection with the purchase or sale of securities, knowingly or recklessly, has: (a)
employed devices, schemes and artifices to defraud; (b) made untrue statements of
material facts and omitted to state material facts necessary in order to make statements
made, in the light of the circumstances under which they were made, not misleading;
and/or (c) engaged in acts, practices and courses of business which operated or would
have operated as a fraud or deceit upon purchasers of securities and upon other persons.
183. In engaging in the conduct described herein, Ustian acted knowingly or
with a reckless disregard for the truth.
184. By reason of the foregoing, Ustian violated, and unless enjoined will
likely again violate, Section 10(b) of the Exchange Act [15 U.S.C. §78j(b)] and Rule l0b-
5 thereunder [17 C.F.R. § 240.10b-5].
COUNT II

Aiding and Abetting Violations of Section 10(b) of the Exchange Act [15 U.S.C. §
78j(b)] and Rule 10b-5 thereunder [17 C.F.R. 240.10b-5]

185. The SEC realleges and incorporates by reference the allegations set forth
in paragraphs 1 through 180 above.

51
186. By virtue of the conduct alleged herein, Navistar committed primary
violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
187. By reason of the foregoing and pursuant to Section 20(e) of the Exchange
Act [15 U.S.C. § 78t(e)], Ustian aided and abetted, and is therefore liable for, the primary
violations committed by Navistar of Section 10(b) of the Exchange Act [15 U.S.C.
§78j(b)] and Rule l0b-5 thereunder [17 C.F.R. § 240.10b-5], because Ustian knowingly
or recklessly provided substantial assistance to Navistar’s violations of these provisions.
Unless enjoined, Ustian will likely again aid and abet violations of these provisions.
COUNT III

Violations of Section 17(a)(1), (2) and (3) of the Securities Act
[15 U.S.C. § 77q(a)(1), (2) and (3)]

188. The SEC realleges and incorporates by reference the allegations set forth
in paragraphs 1 through 180 above.
189.  By virtue of the conduct alleged herein, Ustian, directly or indirectly,
singly or in concert with others, in the offer and sale of securities, by use of the means
and instruments of transportation and communication in interstate commerce and by use
of the mails, has: (a) employed devices, schemes or artifices to defraud; (b) obtained
money or property by means of untrue statements of material fact or omissions to state
material facts necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading; and/or (c) engaged in
transactions, practices or courses of business which operate or would operate as a fraud
or deceit upon the purchaser.
190. In engaging in the conduct described herein, Ustian acted knowingly
and/or with a reckless disregard for the truth.

52
191. In engaging in the conduct described herein, Ustian acted negligently.
192. By reason of the foregoing, Ustian has violated, and unless enjoined will
likely again violate, Sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Securities Act [15
U.S.C. § 77q(a)(1), § 77q(a)(2) and § 77q(a)(3)].
COUNT IV

Aiding and Abetting Violations of Section 17(a)(1), (2) and (3) of the Securities Act
[15 U.S.C. § 77q(a)(1), (2) and (3)]

193. The SEC realleges and incorporates by reference the allegations set forth
in paragraphs 1 through 180 above.
194.  By virtue of the conduct alleged herein, Navistar committed primary
violations of Sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Securities Act.
195. By reason of the foregoing and pursuant to Section 15(b) of the Securities
Act [15 U.S.C. § 77o(b)], Ustian aided and abetted, and is therefore liable for, the
primary violations committed by Navistar of Sections 17(a)(1), 17(a)(2) and 17(a)(3) of
the Securities Act [15 U.S.C. § 77q(a)(1), § 77q(a)(2) and § 77q(a)(3)] because Ustian
knowingly or recklessly provided substantial assistance to such entity’s violations of
these provisions.  Unless enjoined, Ustian will likely again aid and abet violations of
these provisions.

53
COUNT V

Aiding and Abetting Violations of Section 13(a) of the Exchange Act [15 U.S.C.
78m(a)] and Exchange Act Rules 12b-20 [17 C.F.R. § 240.12b-20], 13a-1 [17 C.F.R. §
240.13a-1], 13a-11 [17 C.F.R. § 240.13a-11] and 13a-13 [17 C.F.R. § 240.13a-13]

196. The SEC realleges and incorporates by reference the allegations set forth
in paragraphs 1 through 180 above.
197. Section 13(a) and Rules 13a-1, 13a-11, and 13a-13 thereunder, require
issuers of registered securities to file with the SEC factually accurate annual and
quarterly reports (Form 10-K and Form 10-Q) and certain current information with the
SEC (Form 8-K).  Rule 12b-20 further provides that, in addition to the information
expressly required to be included in a statement or report, there shall be added such
further material information, if any, as may be necessary to make the required statements,
in light of the circumstances under which they were made, not misleading.
198. By virtue of the conduct alleged herein, Navistar committed violations of
Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11 and 13a-13
thereunder.
199. By reason of the foregoing and pursuant to Section 20(e) of the Exchange
Act [15 U.S.C. § 78t(e)], Ustian aided and abetted, and is therefore liable for, the primary
violations committed by Navistar of Section 13(a) of the Exchange Act and Rules 12b-
20, 13a-1, 13a-11 and 13a-13 thereunder, because Ustian knowingly or recklessly
provided substantial assistance to Navistar’s violations of these provisions.  Unless
enjoined, Ustian will likely again aid and abet violations of these provisions.

54
COUNT VI

Violations of Exchange Act Rule 13a-14 [17 C.F.R. § 240.13a-14]

200. The SEC realleges and incorporates by reference the allegations set forth
in paragraphs 1 through 180 above.
201. As the principal executive officer of Navistar, Ustian was required to, and
did, sign and certify Navistar’s annual report on Form 10-K for 2011, and its quarterly
reports on Form 10-Q for its 2012 fiscal quarters.  Among other things, Ustian certified
that the reports did not contain any untrue statement of material fact or omit to state a
material fact necessary to make the statements made not misleading.  The certifications
were materially false.
202. By virtue of the conduct alleged herein, Ustian violated Exchange Act
Rule 13a-14 [17 C.F.R. § 240.13a-14].
COUNT VII
Control Person Liability
Section 20(a) of the Exchange Act [15 U.S.C. § 78t(a)]
203. The SEC realleges and incorporates by reference the allegations set forth
in paragraphs 1 through 180 above.
204. By virtue of the conduct alleged herein, Navistar committed violations of
Sections 10(b) [15 U.S.C. §78j(b)] and 13(a) [15 U.S.C. 78m(a)] of the Exchange Act
and Rules l0b-5 [17 C.F.R. § 240.10b-5], 12b-20 [17 C.F.R. § 240.12b-20], 13a-1 [17
C.F.R. § 240.13a-1], 13a-11[17 C.F.R. § 240.13a-11] and 13a-13 [17 C.F.R. § 240.13a-
13] thereunder.
205. As set forth above, during the relevant period, Ustian directly or
indirectly, controlled Navistar.

55
206. Pursuant to Section 20(a) of the Exchange Act [15 U.S.C. § 78t(a)], Ustian
is liable as a control person for Navistar’s violations of Sections 10(b) [15 U.S.C.
§78j(b)] and 13(a) [15 U.S.C. 78m(a)] of the Exchange Act and Rules l0b-5 [17 C.F.R. §
240.10b-5], 12b-20 [17 C.F.R. § 240.12b-20], 13a-1 [17 C.F.R. § 240.13a-1], 13a-11[17
C.F.R. § 240.13a-11] and 13a-13 [17 C.F.R. § 240.13a-13] thereunder.
207. Pursuant to Section 20(a) of the Exchange Act [15 U.S.C. § 78t(a)], Ustian
is liable jointly and severally with and to the same extent as Navistar for Navistar’s
violations.
RELIEF REQUESTED
WHEREFORE, the Commission respectfully requests that the Court:
I.
 Injunctive Relief
 Issue an Order of Permanent Injunction, in a form consistent with Rule 65(d) of
the Federal Rules of Civil Procedure, permanently restraining and enjoining Ustian, his
officers, agents, servants, employees, attorneys and those persons in active concert or
participation with them who receive actual notice of the Order, by personal service or
otherwise, and each of them from, directly or indirectly, engaging in the transactions,
acts, practices or courses of business described above, or in conduct of similar purport
and object, in violation of Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)]; and
Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rules 10b-5 [17 C.F.R. §
240.10b-5] and 13a-14 [17 C.F.R. § 240.13a-14] thereunder, and from aiding and
abetting violations of Section 13(a) of the Exchange Act [15 U.S.C. § 78m(a)] and
Exchange Act Rules 12b-20, 13a-1, 13a-11 and 13a-13 [17 C.F.R. §§ 240.12b-20,
240.13a-1, 240.13a-11 and 240.13a-13].

56
II.
Disgorgement with Prejudgment Interest

Issue  an  Order  requiring  Ustian  to  pay  disgorgement  of  ill-gotten  gains  that  he
received,  directly  or  indirectly,  as  a  result  of  his  wrongful  conduct  set  forth  in  this
Complaint, including prejudgment interest.
III.
Civil Penalty

Issue an Order imposing an appropriate civil penalty upon Ustian pursuant to
Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)] and Section 20(d) of the
Securities Act [15 U.S.C. § 77t(d)].
IV.
Officer and Director Bar

Issue an Order imposing an officer and director bar pursuant to Section 21(d)(2)
of the Exchange Act [15 U.S.C. § 78u(d)(2)].
V.
Retention of Equitable Jurisdiction

Retain jurisdiction of this action in accordance with the principles of equity and
the Federal Rules of Civil Procedure in order to implement and carry out the terms of all
orders and decrees that may be entered or to entertain any suitable submission or motion
for additional relief within the jurisdiction of this Court.
VI.
Other Relief
Grant such orders for further relief the Court deems appropriate.

57
JURY DEMAND
The Commission requests a trial by jury.
Dated:            March            31,            2016                                                Respectfully            submitted,

UNITED STATES SECURITIES
AND EXCHANGE
COMMISSION

/s Anne Graber Blazek
______________________________
                                                                                    By:            One            of            its            Attorneys

Eric M. Phillips
Jonathan S. Polish
Amy Flaherty Hartman
Anne Graber Blazek
Timothy Stockwell
United States Securities and Exchange Commission
175 West Jackson Boulevard
Ninth Floor
Chicago, Illinois 60604
Telephone: (312) 353-7390

IN THE UNITED STATES DISTRICT COURT  
FOR THE NORTHERN DISTRICT OF ILLINOIS 

EASTERN DIVISION 
 

        ) 
UNITED STATES SECURITIES AND    ) 
EXCHANGE COMMISSION,    ) 
        )    

Plaintiff,  ) Civil Action No. 16-cv-3885 
  )  

v.     ) Jury Trial Demanded 
  )  
DANIEL C. USTIAN,      )  

     ) 
Defendant.    ) 

___________________________________________________ ) 
 
        

COMPLAINT 
 
 Plaintiff, the United States Securities and Exchange Commission (“SEC” or 

“Commission”), brings this action against Daniel C. Ustian (“Ustian” or the 

“Defendant”) and alleges for its complaint against him as follows: 

 
SUMMARY OF ALLEGATIONS 

1. From late 2010 through 2012, Defendant Ustian, the then-President and 

Chief Executive Officer of Navistar International Corporation (“Navistar”) led a 

campaign of deception.  The deception was manifested in Ustian’s and Navistar’s 

fraudulent statements to the public about Navistar’s ability to meet the Environmental 

Protection Agency’s (“EPA”) deadline to comply with rigorous emission standards for 

heavy-duty diesel truck engines.  

2. These emission standards were not news to Navistar, a publicly-traded 

truck, bus and diesel engine manufacturer headquartered in Lisle, Illinois.  The EPA had 

issued the standards in 2001 to ultimately limit the discharge of nitrogen oxide or “NOx” 

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emissions from on-road heavy-duty truck engines to 0.20 grams per brake horsepower 

hour (the “0.20 NOx standard”).  The EPA, recognizing that the new standards would 

require reconfigured engines, delayed compliance with the 0.20 NOx standard until 2010, 

and allowed engine manufacturers to gradually step down NOx emissions levels over the 

intervening years.  

3. Under Ustian’s direction, Navistar sought to meet this challenge by 

developing engines that utilized only “exhaust gas recirculation” or “EGR” technology.  

EGR-only technology reduced NOx emissions by capturing a portion of exhaust gas, 

which it cooled and blended with fresh air before returning the gas back into the engine’s 

cylinder. 

4. Within the company and publicly, Ustian trumpeted EGR-only technology 

as important to Navistar’s financial success while relentlessly criticizing the alternative 

technology adopted by Navistar’s competitors.  And he put Navistar’s money and 

resources where his mouth was.  Under his watch, Navistar staked $700 million and tens 

of thousands of hours of its engineers’ time on EGR-only technology.     

5. By 2010 when the 0.20 NOx standard went into effect, Navistar had not 

certified an EGR-only engine at the 0.20 NOx standard.  However, Navistar was able to 

continue selling engines by using emission credits that Navistar had banked from its 

previous sales of earlier generations of engines.   

6. But as its limited stockpile of credits began to dwindle in 2011 and 2012, 

Navistar was encountering significant engineering roadblocks in receiving EPA 

certification of an EGR-only engine at the 0.20 NOx standard without compromising fuel 

economy and performance. 

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7. Given how critical EGR-only technology was to Navistar’s long-term 

success, and Ustian’s professional reputation, Ustian needed more time to continue 

development of a commercially viable 0.20 NOx EGR-only engine.  If the truth about the 

increasingly difficult development and EPA certification process came to light, serious 

consequences were likely to follow.  Navistar’s customers could defect, its stock price 

could suffer, and it could be forced to abandon EGR-only technology altogether. 

8. Rather than tell the public the truth and face these consequences, Ustian 

engaged in a progressively desperate and fraudulent scheme to deceive the investing 

public into believing that EPA certification of a competitive EGR-only engine that met 

the 0.20 NOx standard was right around the corner.   The deception was manifested in 

Ustian’s and Navistar’s statements in conference calls with analysts, in press releases, 

and in reports filed with the SEC. 

9. With Ustian’s knowledge, during 2011 and 2012 Navistar submitted three 

applications to the EPA for certification of a heavy-duty diesel EGR-only engine at the 

0.20 NOx standard.   Unknown to the investing public, the first such application included 

an engine that Ustian knew Navistar could never sell — even if it were certified by the 

EPA.  Ustian and Navistar filed this application anyhow to deceive the public about 

Navistar’s progress in developing a certifiable and commercially competitive EGR-only 

engine that met the 0.20 NOx standard. 

10. Once it became clear that the EPA would not approve this first 

application, Navistar followed up with two additional applications in 2012.  As Ustian 

and Navistar knew, the EPA quickly made clear that these applications were also 

deficient and unlikely to receive approval without significant modifications. 

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11. As was well known to Ustian and Navistar, Navistar’s engineers were 

having difficulty developing and certifying an EGR-only engine that could meet the 0.20 

NOx standard without sacrificing fuel economy and other performance features, 

discussions with the EPA were at an impasse, and Navistar’s applications were going 

nowhere. 

12. Nonetheless, from 2010 through 2012, instead of coming clean with the 

public regarding the difficulties Navistar was experiencing in developing and certifying a 

competitive EGR-only engine, Ustian engaged in a coverup.  During this period, Ustian 

and Navistar made false and misleading public statements that led investors to believe 

that Navistar’s efforts to produce a commercially competitive EGR-only engine meeting 

the 0.20 NOx standard were proceeding without major engineering or EPA roadblocks. 

13. By mid-2012, the costs and difficulties of development and certification of 

the 0.20 NOx EGR-only engine became too great, Navistar’s stockpile of emissions 

credits was running out, and the truth could no longer be suppressed.  In July 2012, 

Navistar announced it was abandoning its EGR-only technology and adopting the 

alternative technology used by Navistar’s competitors.  Navistar’s stock price 

plummeted, and shortly thereafter its Board of Directors sought and secured Ustian’s 

resignation.   

14. Through the activities alleged in this Complaint, Ustian, directly or 

indirectly, has engaged in transactions, acts, practices or courses of business which 

constitute violations of Section 17(a) of the Securities Act of 1933 (“Securities Act”) [15 

U.S.C. § 77q(a)] and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange 

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Act”) [15 U.S.C. § 78j(b)] and Rule 10b-5 [17 C.F.R. § 240.10b-5] promulgated 

thereunder.  

15. Ustian also, directly or indirectly, has engaged in transactions, acts, 

practices, and courses of business which constitute violations of Rule 13a-14 of the 

Exchange Act [17 C.F.R. § 240.13a-14]. 

16. Additionally, Navistar directly or indirectly, has engaged in primary 

violations of Sections 10(b) and 13(a) of the Exchange Act and Rules 10b-5, 12b-20, 

13a-1, 13a-11 and 13a-13 promulgated thereunder, and Ustian aided and abetted and was 

a control person for Navistar’s violations of these provisions. 

17. Additionally, Navistar, directly or indirectly, has engaged in primary 

violations of Section 17(a) of the Securities Act, and Ustian aided and abetted Navistar’s 

violations of these provisions. 

18. The SEC brings this action to restrain and enjoin such transactions, acts, 

practices and courses of business pursuant to Sections 21(d) and 20(e) of the Exchange 

Act [15 U.S.C. § 78u(d) and § 78t(e)] and Section 20(b) of the Securities Act [15 U.S.C. 

§ 77t(b)]. 

19. The SEC seeks permanent injunctive relief against Ustian to enjoin him 

from future violations of the federal securities laws, the imposition of disgorgement, with 

prejudgment interest, civil penalties against Ustian, and an officer and director bar 

against him. 

JURISDICTION 

20. The Commission brings this action pursuant to the authority conferred by 

Section 20(b) of the Securities Act [15 U.S.C. § 77t(b)] and Section 21(d) of the 

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Exchange Act [15 U.S.C. § 78u(d)], seeking to restrain and enjoin permanently the 

Defendant from engaging in the acts, practices, transactions and courses of business 

alleged herein, and for such other relief as may be appropriate. 

21. This Court has jurisdiction over this action, and venue lies in this District, 

pursuant to Sections 20(d) and 22(a) of the Securities Act [15 U.S.C. §§ 77t(d) and 

77v(a)], and Sections 21(d) and 27 of the Exchange Act [15 U.S.C. §§78u(d) and 78aa]. 

The Defendant, directly or indirectly, singly or in concert, has made use of the means or 

instruments of transportation or communication in, and the means or instrumentalities of, 

interstate commerce, or of the mails, in connection with the transactions, acts, practices, 

and courses of business alleged herein.  Some of these transactions, acts, practices and 

courses of business occurred in the Northern District of Illinois, where the Defendant 

transacted business and resided during the relevant period. 

22. Defendant has, directly and indirectly, made use of the mails, and of the 

means and instrumentalities of interstate commerce, in connection with the transactions, 

acts, practices and courses of business alleged in this Complaint. 

23. There is a reasonable likelihood that Defendant will, unless enjoined, 

continue to engage in the transactions, acts, practices and courses of business set forth in 

this Complaint, and transactions, acts, practices and courses of business of similar 

purport and object. 

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THE DEFENDANT 

24. Daniel C. Ustian, age 65, was Navistar’s President and CEO from 2003 

through August 2012; Chairman of the Board of Directors from 2004 through August 

2012; and a director from 2002 through August 2012. Ustian also was the President of 

Navistar’s Engine Group from 1999 through 2002 and Group Vice President and General 

Manager of the Engine & Foundry Group of Navistar from 1993 through 1999.  

RELATED PARTY 

25. Navistar International Corporation is a Delaware corporation that 

maintains its principal executive offices in Lisle, Illinois.  Navistar is an international 

manufacturer of commercial and military trucks, buses and diesel engines and a provider 

of service parts for trucks and trailers.  The Company’s stock is listed on the New York 

Stock Exchange under the ticker symbol “NAV.” 

FACTS 

I. Navistar Develops an “EGR-Only” Technology Different from Its 
Competitors’ Technologies 

 
26.  In 2001, pursuant to the Clean Air Act, the EPA enacted a rule requiring 

new heavy-duty diesel engines to meet the 0.20 NOx standard by 2010.  NOx is a 

pollutant and reacts in the atmosphere to create smog and acid rain.  By delaying the 

effective date of the rule requiring emissions at the 0.20 NOx standard until 2010, the 

EPA gave the industry nine years to innovate the necessary new technologies. 

27. To comply with the 0.20 NOx standard, Navistar and Ustian chose to rely 

on EGR-only technology, which recirculates exhaust into the engine’s cylinders before 

release, to reduce NOx emissions. This approach also was referred to as “in-cylinder” 

technology.  

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28. All of Navistar’s major competitors adopted an alternative technology 

known as selective catalytic reduction (“SCR”), which involves chemically treating 

exhaust before its release. 

29. From 2001 through 2012, Navistar devoted tens of thousands of employee 

hours and approximately $700 million to the development of its EGR-only technology. 

As Navistar disclosed in its fiscal year 2010 annual report filed on Form 10-K, 

“[f]ocusing on engine research and development in order to have a competitive advantage 

using Exhaust Gas Recirculation (‘EGR’) and other technologies for compliance with 

2010 emissions standards” was a key part of its long-term strategy. 

30. Navistar’s decision to rely on EGR-only technology was a high-stakes bet 

for the company and Ustian.  Although EGR-only technology offered the possibility of 

significant advantages over SCR technology, successful commercial implementation of 

EGR-only technology posed significant engineering challenges.   

31. Nonetheless, at Ustian’s direction, Navistar did not prepare a back-up plan 

in case it was ultimately unsuccessful in using EGR-only technology to meet EPA 

emissions standards.  As Ustian stated at a September 15, 2009 conference attended by, 

among others, securities analysts, “Plan B is we’re going to make Plan A work.”   

32. To make that plan work, Navistar needed EPA approval of its EGR-only 

engines.  A manufacturer of heavy-duty diesel engines in the United States, such as 

Navistar, must obtain a certificate of conformity (“Certificate”) from the EPA each year 

for each model of engine family that it sells. 

33.  Using SCR technology, Navistar’s competitors had obtained Certificates 

from the EPA by 2010 indicating that the engines they manufactured met the 0.20 NOx 

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standard.  By 2010, Navistar had not even submitted an application for certification of a 

heavy-duty diesel engine at the 0.20 NOx standard.  

34. Navistar’s ability to develop and certify a commercially competitive 

engine at the 0.20 NOx standard was important to Navistar’s customers and to Navistar’s 

investors.    

35. Ustian was actively involved in Navistar’s efforts to develop and obtain 

certification of an EGR-only engine at the 0.20 NOx standard, including picking the 

engineering team to work on the engine development, receiving updates from the 

engineers and certification team on the engine’s development status and certification 

status with the EPA, helping the team solve problems, and motivating the team.  From 

2010 through 2012, Ustian regularly received updates from the engineering team, the 

certification team and Navistar executives regarding both the status of development work 

on Navistar’s EGR-only technology and Navistar’s communications with the EPA about 

its applications for certification of an EGR-only engine at the 0.20 NOx standard.  

II. Navistar Relies on Emissions Credits to Sell Engines While It Attempts to 
Obtain EPA Certification 

 
36. Prior to 2010, Navistar had produced engines with emissions that were 

cleaner than required by the EPA.  This allowed Navistar to generate a “bank” of 

emissions credits.  Under the EPA’s emissions credits system, Navistar could use these 

emissions credits to sell engines at levels higher than the 0.20 NOx standard and, in turn, 

gained more time to develop and certify an EGR-only engine at the 0.20 NOx standard.   

37. Because Navistar did not have a Certificate for a 0.20 NOx engine when 

the 0.20 NOx standard went into effect on January 1, 2010, Navistar continued to sell its 

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engines certified at a NOx level higher than 0.20 NOx and used emissions credits to 

offset the difference in NOx.  

38. Once the 0.20 NOx standard went into effect, however, Navistar could no 

longer generate additional emissions credits on engines with emissions higher than 0.20 

NOx.  Thus, its bank of emissions credits was limited. 

39. Navistar planned to seek EPA certification of its 13-liter EGR-only engine 

at the 0.20 NOx standard first.  Once it obtained a Certificate for its 13-liter EGR-only 

engine, Navistar then planned to apply that same technology to seek certification of its 

other engines at the 0.20 NOx standard, including its 11-liter and 15-liter engines.   The 

company planned to focus on certifying its 11-liter, 13-liter and 15-liter engines, known 

at Navistar as the “big bore” engines, before moving onto other engine families because 

it expected its emissions credits for the big bore engines to run out first. 

40. While using its limited emissions credits, Navistar continued to try to 

develop its EGR-only technology and obtain a Certificate for an engine at the 0.20 NOx 

standard.  Navistar’s goal was to develop an EGR-only engine that emitted 0.20 NOx or 

less and offered improved fuel economy, acceleration and power compared to the 0.50 

NOx EGR-only engines Navistar was currently selling using emissions credits.  As of 

late 2010, Navistar engineers and executives had informed Ustian that this 0.20 NOx 

EGR-only engine with competitive performance features was not predicted to be ready 

for production until at least the end of 2012.  

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III. Navistar’s 2010 Registration Statement and Ustian’s 2011 Stock Sale 

41. From 2010 through 2012, Navistar common stock was registered and 

traded on the New York Stock Exchange. 

42. Navistar filed a registration statement on April 23, 2010 to register shares 

of common stock under its equity compensation plan.  Form S-8 registration statements 

incorporate by reference certain prior filings and all subsequently filed periodic reports 

until the company files a post-effective amendment terminating the offering, which 

Navistar never did.  Navistar’s offering pursuant to this registration statement was 

ongoing through the end of 2012.   

43. Pursuant to this registration statement, Navistar issued stock-based 

compensation to Ustian and its other executives, directors, and non-executive officers 

between late 2010 and the summer of 2012.  Ustian sold Navistar stock on April 5, 2011. 

IV. Ustian and Navistar Make Fraudulent Statements and Engage in Other 
Deceptive Conduct 

 
44. Beginning in late 2010, as investors, analysts, Navistar’s customers and 

Navistar’s competitors questioned whether Navistar could ever develop and certify a 

commercially competitive EGR-only engine at the 0.20 NOx standard, Ustian and 

Navistar engaged in a fraudulent scheme to conceal from the public the significant 

challenges Navistar was facing in developing and certifying a commercially competitive 

EGR-only engine at the 0.20 NOx standard before its emissions credits ran out.  Through 

his misstatements, Ustian repeatedly tried to reassure the public that Navistar’s EGR-only 

engines could meet the 0.20 NOx standard while offering competitive performance 

features, and that certification would occur before Navistar was at risk of running out of 

emissions credits.  Ustian’s and Navistar’s fraudulent scheme was intended to hide from 

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 12

the public the serious issues Navistar was encountering in developing and certifying its 

EGR-only engines.  This fraudulent scheme included the following: 

A. November 2010 Press Release 
 

45. On November 3, 2010, Navistar issued a press release regarding a facility 

tour for media and securities analysts at the company’s Huntsville, Alabama engine plant 

(the “November 2010 Press Release”).  

46. Ustian reviewed, approved, and provided a quote for the November 2010 

Press Release. 

47. The November 2010 Press Release stated in pertinent part:  

Navistar also advised that it has submitted certification to the EPA for its 
MaxxForce 15 and plans to submit for EPA certification of its MaxxForce 
13 at 0.2g NOx in the next few months, far ahead of when high volume 
production of the 0.2g NOx-certified MaxxForce 13 would be required.  
 
48. The “MaxxForce 15” that Navistar and Ustian referred to in the press 

release was a 15-liter engine that Navistar was submitting for certification above 0.20 

NOx.  Navistar had developed this engine to the point that it had competitive fuel 

economy and other performance features compared to other 15-liter engines being sold in 

the marketplace.  Because the MaxxForce 15 engine was competitive with other 15-liter 

engines in the marketplace, Navistar and Ustian intended to, and ultimately did, sell this 

engine upon certification from the EPA. 

49. The “MaxxForce 13 at 0.2g NOx” that Navistar referred to in the press 

release was a 13-liter engine that Navistar still was developing for certification at the 

0.20 NOx standard using EGR-only technology. 

50. This 13-liter engine lacked competitive fuel economy and other 

performance features compared to other 13-liter engines being sold in the marketplace.   

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 13

51. Because the MaxxForce 13 lacked performance features competitive with 

other 13-liter engines, Ustian knew that even if the EPA issued a Certificate for the 

engine, Navistar could not sell the engine in the marketplace. 

52.  In the context of a discussion otherwise devoted to engines being sold, or 

intended to be sold, in the marketplace, the November 2010 Press Release referenced a 

certification application for a 13-liter engine at the 0.20 NOx standard.  In fact, Navistar 

and Ustian knew, but did not disclose, that unlike the other engine referenced in the press 

release, Navistar could not produce and sell that 13-liter engine in the marketplace even 

if the EPA issued a Certificate for it because Navistar had not yet developed its EGR-

only technology to the point that in the next few months it could obtain certification at 

the 0.20 NOx standard while also offering competitive performance features.   

B. December 2010 Analyst Conference Call 
 
53. On December 22, 2010, Ustian and other Navistar executives conducted a 

conference call with securities analysts (the “December 2010 Analyst Call”) in 

conjunction with Navistar’s filing of its fiscal year 2010 annual report on Form 10-K.  

54. It was Navistar’s general practice to conduct conference calls with 

securities analysts in conjunction with Navistar’s filing of its quarterly and annual reports 

with the SEC.  As a general matter, the securities analysts participating in these calls 

periodically made recommendations to clients and others about whether to buy or sell 

Navistar stock. Further, although Navistar directed the contents of these calls towards 

securities analysts, Navistar permitted the investing public to listen to the calls by dialing 

the number that Navistar published for the calls. 

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55. During the December 2010 Analyst Call, a securities analyst asked in 

pertinent part: “[O]n the 13 liter in terms of certifying that at 0.2, what kind of timeline 

do you think we are looking at there?” Ustian responded in pertinent part:  

[W]e will submit that over the next couple of months I believe. . . . [W]e 
would be able to show you the data that it meets 0.2 and show you how we 
are able to meet it. But as far as the customers, he is not going to know the 
difference. Nothing looks any different. 
 

Later during the call, another securities analyst asked Ustian in pertinent part: “Dan, can 

you talk about the fuel efficiency of your 13-liter 0.2 NOx versus an equivalent SCR 0.2 

NOx engine? Do you anticipate running those comparisons?” Ustian responded in 

pertinent part:   

The fuel economy of the 0.2 will be better and there will be no change in 
heat rejection at the same time. So this product will be even better. 
 

When the analyst followed up with a question about whether this engine would be “better 

than an equivalent SCR 0.2 NOx,” Ustian responded:  

Well, our strategy has been we will be equal to any SCR – the best of any 
SCR product that is out there. So we are assuming the SCR product gets a 
little better too, and that is what we are going to be able to do with getting 
to 0.2. 
 
56. Ustian deceived investors through his statements that the EGR-only 

engine that Navistar planned to submit to the EPA in the next few months offered better 

fuel economy and performance features than either Navistar’s current 0.50 NOx engines 

or its competitors’ SCR engines.  Ustian knew, but did not disclose, that as of the time he 

made these statements on December 22, 2010, Navistar’s 13-liter engine was not yet 

capable of limiting emissions to 0.20 NOx while also offering “better” fuel economy and 

other performance features than Navistar’s competitors’ SCR engines or even fuel 

economy and other performance features equal to Navistar’s existing 0.50 NOx engines 

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such that the customer would not “know the difference.”  Ustian also knew, but did not 

disclose, that Navistar would not be able to offer these advancements in fuel economy 

and performance in “the next couple of months” and thus would not be able to submit a 

certification application to the EPA in the next couple of months for a 13-liter 0.20 NOx 

EGR-only engine with competitive performance features that could be produced and sold 

in the marketplace.   

 C. 2011 Certification Application 

57. On February 21, 2011, Navistar submitted an application to the EPA for 

certification of a 13-liter engine at the 0.20 NOx standard using Navistar’s EGR-only 

technology (the “2011 Application”).  Ustian was aware of Navistar’s 2011 Application 

to the EPA and was regularly updated on the development and certification work for the 

2011 Application both before and after it was submitted to the EPA.  Internally at 

Navistar, this application was associated with Ustian and was referred to at Navistar as 

“D-cert,” for “Dan-certification.” 

58. At the time the 2011 Application was submitted to the EPA, Ustian knew 

that the 13-liter engine described in the 2011 Application could not be sold in the 

marketplace even if the EPA issued a Certificate for it.  Ustian knew that this engine 

required further development work to attain the fuel economy and performance features 

necessary to make it a usable, competitive engine when installed in a truck and to make it 

an engine Navistar could sell. 

59. It was unusual, if not unprecedented, for Navistar to submit a certification 

application to the EPA knowing that the engine that was the subject of the application 

could not be sold in the marketplace even if a Certificate were granted. 

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60. In fact, at the time the 2011 Application was submitted to the EPA, the 

engine described in the application could run only in the testing laboratory.  In a 

February 9, 2011 email regarding the engine covered by the 2011 Application, a Navistar 

Senior Technical Specialist working on certification matters told other engineers in the 

certification group: 

I asked a bigger question. Would this engine ever be drivable in a truck 
and I got laughs in response. . . .  Translation you have a[n] underpowered 
13 liter engine that is coughing, sputtering and wheezing like some 
terminal cancer patient on a respirator. 
 
61. At the time the 2011 Application was submitted to the EPA, Ustian also 

knew that the Application was incomplete and that the EPA told Navistar it would not 

issue a Certificate without Navistar providing additional test results.  In the months 

before the 2011 Application was submitted to the EPA, the EPA told Navistar it would 

not accept Navistar’s use of test results from its current 0.50 NOx engine to satisfy 

durability testing requirements, known as Deterioration Factor testing, for its proposed 

0.20 NOx engine because significant differences existed between the two engines.   

62. Despite the EPA expressly stating that it would not accept Navistar’s use 

of its 0.50 NOx engine Deterioration Factor test results in its 2011 Application, Navistar 

submitted the 2011 Application without conducting new Deterioration Factor testing.  As 

Navistar’s Chief Certification Engineer stated in a February 21, 2011 email that was 

forwarded to Ustian the same day that the 2011 Application was submitted to the EPA, 

“Durability data and results from the current [0.50 NOx] engine were used in the 

submittal despite EPA disallowing that version of durability demonstration.” 

63. Ustian knew that the D-cert engine described in the 2011 Application 

lacked performance features to be a competitive, usable engine in a truck and that the 

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engine could not be put into production even if certified.   For example, Navistar’s 

Director of Advanced Technology told Navistar executives in a March 1, 2011 email,  

[I]t has been made very clear in the reviews that I have been in that the D-
Cert power curve is not drive-able or saleable so we need to be very 
careful in how things are described to the reporter.   
 

When Navistar’s Vice President of Powertrain Product Development forwarded this 

email to Navistar’s Vice President of Integrated Product Development and suggested he 

talk with Ustian about these issues with the D-cert engine, the Vice President of 

Integrated Product Development responded that Ustian “totally knows it” and advised 

him to “[t]ell these guys to not worry about this sh[--] and not keep sending emails to 

each other.” 

64. Navistar submitted the 2011 Application to the EPA despite the fact that 

Navistar never intended to sell the engine described in the application and the fact that 

the 2011 Application did not have new Deterioration Factor testing results, which the 

EPA told Navistar were required for a Certificate.   Because the 2011 Application lacked 

new Deterioration Factor testing, Ustian knew the EPA was unlikely to issue a 

Certificate.   Further, because the D-cert engine described in the 2011 Application was 

not even drivable in a truck, Ustian knew that Navistar would never sell this engine.  In 

spite of these issues, Navistar submitted the 2011 Application because Ustian wanted to 

use it as a marketing tool to convince investors of Navistar’s supposed progress in 

developing an EGR-only engine at the 0.20 NOx standard while it continued to work on 

developing an engine with competitive performance features that it could put into 

production.   

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65. In the weeks after Navistar submitted the 2011 Application, the EPA 

responded to the 2011 Application and advised Navistar that the application did not meet 

the EPA’s certification requirements.  Among other concerns, the EPA continued to insist 

that Navistar run new Deterioration Factor testing.  During spring 2011, Navistar 

engineers questioned whether they could run a Deterioration Factor test on the engine 

that was the subject of the 2011 Application without the engine experiencing component 

failure.   

66. By submitting the 2011 Application to the EPA for certification of an 

engine that could not be driven or sold and through Navistar’s and Ustian’s public 

statements about it described in paragraphs 47, 55, 70, 73 and 75 through 76, Ustian and 

Navistar created the misleading impression that Navistar had successfully developed an 

EGR-only engine that met the 0.20 NOx standard while attaining competitive 

performance features.  In fact, as Ustian knew, Navistar’s EGR-only engine was not 

drivable if installed in a truck, lacked competitive performance features, could not be 

sold in the marketplace even if certified by the EPA and did not meet the EPA’s 

certification requirements.    

67. Analysts and investors were misled by Navistar’s submission of the 2011 

Application because they understood Navistar’s and Ustian’s statements regarding the 

engine covered by the 2011 Application, and the fact that Navistar had submitted the 

application, to mean that Navistar currently had a 13-liter EGR-only engine with 

competitive fuel economy and other performance features that could meet the 0.20 NOx 

standard and that Navistar could sell the engine in the marketplace if the EPA certified it.    

Analysts and investors did not know that the engine described in the 2011 Application 

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was not drivable when installed in a truck and could not be put into production even if 

the EPA certified it. 

68. Analysts and investors were also misled because they believed that the 

2011 Application was a complete application that included the information necessary for 

the EPA to approve it.  Analysts and investors did not know that the 2011 Application 

was incomplete and lacked necessary testing, including new Deterioration Factor testing 

that the EPA expressly told Navistar was required before the 2011 Application was 

submitted. 

 D. March 2011 Analyst Conference Call  
 

69. On March 9, 2011, Ustian and other Navistar executives conducted a 

conference call with securities analysts (the “March 2011 Analyst Call”) in conjunction 

with Navistar’s filing of its first quarter 2011 quarterly report on Form 10-Q. 

70. During the March 2011 Analyst Call, before taking any questions from 

securities analysts, Ustian addressed Navistar’s 2011 Application, stating in pertinent 

part: 

Now let’s talk about in-cylinder 0.2. One of our challenges, perhaps as 
difficult a challenge as the technology itself, was the marketing side of our 
solution, which is in-cylinder. Since we were the only ones out there, there 
is a lot coming at us with this can’t work and, of course, now we are out in 
the marketplace and that’s over. That argument is over. We are out there 
in the marketplace. We are exceeding what we had committed to in terms 
of performance and fuel economy and all that. So that’s over. 
 
We want to get in front of the 0.2 now, because we can anticipate there is 
a next one coming out that 0.2 can’t be done. So what we did is we 
submitted to the EPA a certification of 0.2 to take that argument away. We 
don’t plan on using this for awhile, but we are going to have it out there 
on the shelf that says it can be done and we can meet the standards and get 
all of the performance features, as well. So [t]hat’s what we have done. 
When you hear about that, it’s not that it’s coming into production 
tomorrow. It’s just to get it out there and take all that argument away. 

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71. Ustian’s statement that that the engine covered by the 2011 Application 

would be “out there on the shelf that says it can be done and we can meet the standards 

and get all of the performance features, as well” was false.  Ustian knew, but did not 

disclose, that the engine covered by the 2011 Application (the engine that was “on the 

shelf”) did not meet the EPA’s certification requirements and did not yet offer 

competitive performance features.  In fact, Ustian knew, but did not disclose, that the 

engine covered by the 2011 Application not only lacked competitive performance 

features, it was not drivable or sellable. 

72. Additionally, Ustian deceived investors through his misleading 

statements, “When you hear about that, it’s not that it’s coming into production 

tomorrow.  It’s just to get it out there and take all that argument away.”  Ustian knew, but 

did not disclose, that Navistar could not put the engine covered by the 2011 Application 

into production even if certified because it was not drivable and did not offer competitive 

fuel economy and other performance features that would allow Navistar to sell the engine 

in the marketplace. 

  E. April 2011 Press Release  

73. On April 5, 2011, Navistar issued a press release (the “April 2011 Press 

Release”) with the headline “Navistar Receives EPA Certification for MaxxForce DT 

Mid-Range Diesel Engine at 0.39g NOx” and the sub-headline “With EPA and CARB 

[California Air Resources Board] Certification of MaxxForce® 15, Submission of 

MaxxForce® 13 at 0.2g NOx, Company Continues to Make Strides in its In-Cylinder 

Emissions Technology Path.” 

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74.  Ustian reviewed and approved the April 2011 Press Release before 

Navistar issued it. 

75. In the April 2011 Press Release, Navistar announced that it had received 

certification for two engines at levels higher than the 0.20 NOx standard: a mid-range 

diesel engine and a 15-liter engine, the “MaxxForce 15.”  Navistar intended to, and did 

eventually, sell both of these engines in the marketplace upon certification from the EPA 

using emissions credits.   

76. In the April 2011 Press Release, Navistar then addressed its 2011 

Application, stating: 

In addition, Navistar also recently submitted its MaxxForce 13 at 0.20g 
NOx for EPA certification, once again reiterating its prime technology 
path in meeting the 0.20g NOx standard through in-cylinder technologies. 
The company intends to phase-in its engines at progressively lower 
emissions levels (0.4g NOx, 0.35g NOx, 0.3g NOx, 0.25g NOx, etc.) in 
the years ahead in an effort to make emissions compliance as seamless as 
possible to its customers. 
 
77. In the context of a discussion otherwise devoted to applications and 

Certificates for engines being sold, or intended to be sold, in the marketplace, the April 

2011 Press Release referenced the 2011 Application for certification of a 13-liter engine.  

In fact, Navistar and Ustian knew but did not disclose that, unlike the other engines 

referenced in the press release, the engine described in the 2011 Application did not meet 

the EPA’s requirements for certification and could not be put into production even if 

certified because it needed extensive development work before it would be drivable or 

could offer competitive performance features to be sold.    

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78. The EPA never approved the 2011 Application.  Later in 2011, Navistar, 

with Ustian’s input and approval, abandoned efforts to gain approval of the 2011 

Application. 

79. It was unusual, if not unprecedented, for Navistar to abandon a 

certification application to the EPA after the EPA failed to approve the application, as 

Navistar did with the 2011 Application. 

F. Navistar’s Projected Depletion of its Emission Credits 

80. By fall 2011, Navistar and Ustian learned that Navistar’s emissions credits 

for its big bore engines could be depleted as early as February 2012.  Without emissions 

credits or an engine certified at the 0.20 NOx standard, Navistar would be unable to 

legally sell engines from its big bore line unless the EPA instituted rule-making to allow 

Navistar to pay non-conformance penalties (“NCPs”). 

81. NCPs are monetary penalties that allow a vehicle or engine manufacturer 

to sell engines that do not meet the emissions standards.  When the EPA institutes rule-

making for NCPs, manufacturers unable to comply with the applicable standard may 

choose to pay NCPs, which are assessed on a per-engine basis.   

82. Only 40 states permit the use of NCPs.  If the EPA instituted rule-making 

to allow Navistar to pay NCPs, Navistar could do so in those 40 states but would have to 

use its emissions credits in the other 10 states.  This would allow Navistar to conserve its 

emissions credits for its big bore engines and extend the anticipated depletion date 

beyond the February 2012 projection.   

83. In fall 2011, Navistar communicated with the EPA about its credit status 

for its big bore engines and its timing for development of a 0.20 NOx big bore EGR-only 

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engine.  Ustian was aware of these communications and participated in some of them.  

Navistar and Ustian informed the EPA that Navistar would be unable to obtain 

certification of a big bore 0.20 NOx engine by the time it expected to use its remaining 

emissions credits in February 2012.   

84. As an alternative to paying NCPs, Navistar proposed that the EPA allow it 

to recalibrate the software on its current 0.50 NOx engine to reduce emissions to 0.20 

NOx in a testing laboratory.  Navistar explained that this recalibration would only reduce 

emissions to 0.20 NOx in a lab; when the engine was driving in a truck on the highway, 

its emissions would be higher than 0.20 NOx.  The EPA rejected this proposal. 

85. Consequently, the EPA continued to work on an interim NCP rule, which 

ultimately went into effect in January 2012, to allow Navistar to pay NCPs while it 

continued to try to obtain a Certificate for an EGR-only engine at the 0.20 NOx standard.  

Ustian was aware that the EPA was promulgating an interim NCP rule because the EPA 

understood that Navistar could not obtain certification of a big bore EGR-only engine at 

the 0.20 NOx standard before Navistar expected its big bore emissions credits to run out. 

86. Navistar engineers continued to encounter significant obstacles in 

developing a 0.20 NOx EGR-only engine with improved performance features.  As of fall 

2011, Navistar’s engineers projected, and Ustian knew, that it would take until at least 

fall 2013 before a 0.20 NOx EGR-only engine with improved performance features 

would be ready to go into production.   

G. Navistar Develops a Bridge Program Engine 

87. In late 2011, Navistar began work on certifying another 13-liter EGR-only 

engine at the 0.20 NOx standard that would bridge the gap between when Navistar’s big 

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bore emissions credits ran out and its 0.20 NOx big bore EGR-only engines with 

improved fuel economy and other performance features were expected to be ready for 

production in the fall of 2013.  Ustian knew this.   

88. This second engine for certification at the 0.20 NOx standard, the bridge 

program engine, involved no hardware changes and no goals to improve fuel economy, 

acceleration or other performance features.   Instead, Navistar engineers planned to 

recalibrate Navistar’s current 0.50 NOx EGR-only engines to reduce emissions in the 

testing laboratory to 0.20 NOx.   This recalibrated engine would include only software 

changes.  Ustian was aware of this bridge program to achieve certification of an EGR-

only engine at the 0.20 NOx standard. 

89. This bridge program engine used a technology known as dual mapping.  In 

the dual mapping technology used in the bridge program engine, the engine would 

operate under one calibration, called Map A, while in emissions testing in a laboratory, 

and would switch to another calibration, called Map B, when it sensed that the vehicle 

was in motion (anything above 0.1 miles per hour).  The engine could meet emissions 

requirements while operating in Map A but had severely reduced fuel economy and 

performance.  To address this problem, the engine would switch to Map B as soon as the 

vehicle was out of idle, which improved fuel economy and performance but resulted in 

emissions significantly above 0.20 NOx.   

H. December 2011 Annual Report 

90. On December 20, 2011, Navistar filed its annual report for its fiscal year 

2011 on Form 10-K (the “December 2011 Annual Report”) through the SEC’s publicly-

available EDGAR document filing system. 

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91. Ustian reviewed and approved the December 2011 Annual Report before 

Navistar filed it.  He also signed and certified the December 2011 Annual Report in his 

capacity as Navistar’s President and CEO. 

92. Navistar employees met with the EPA on December 16, 2011, four days 

before Navistar filed its December 2011 Annual Report.  During that meeting, Navistar 

discussed its plans to submit in early 2012 a second application for certification of a 13-

liter engine at the 0.20 NOx standard using Navistar’s EGR-only technology.   Navistar 

engineers described how this proposed 0.20 NOx engine operated, including its dual 

mapping technology.  During the meeting, the EPA told Navistar that an engine using a 

dual mapping strategy in the manner described by Navistar would not meet EPA 

standards. 

93. On December 16, 2011, immediately after meeting with Navistar, an EPA 

official emailed Navistar’s Vice President of Government Relations, who attended the 

meeting, with “important takeaways from the meeting,” including:  

First as we discussed, under the Clean Air Act and our regulations EPA 
can not [sic] issue a certificate (conditional or otherwise) unless the engine 
meets the [three certification] requirements.  The engine described today 
by the Navistar team for certification in February [2012] does not appear 
to meet these requirements. 
 
94. Ustian received a copy of this email on December 16, 2011. 

95. In Navistar’s December 2011 Annual Report, which Navistar filed on 

December 20, 2011, just four days after its December 16, 2011 meeting with the EPA, 

Navistar stated in pertinent part:  

We plan to submit certification applications to both EPA and CARB in the 
near future. We believe that our engines meet both agencies’ certification 
requirements. We are engaged in ongoing discussions with officials from 
both EPA and CARB regarding potential regulatory solutions that would 

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permit us to continue uninterrupted production of all of our engines. We 
cannot predict the outcome of these discussions nor the effect they may 
have on our business or financial condition, results of operation or cash 
flows.  
 
96. When Navistar discussed in the December 2011 Annual Report its plans to 

submit a certification application to the EPA, Navistar was referring to the certification 

application for the 13-liter engine that Navistar had described to the EPA in the meeting 

on December 16, 2011. 

97. The December 2011 Annual Report deceived investors through its 

misleading statement, “We plan to submit certification applications to both EPA and 

CARB in the near future. We believe that our engines meet both agencies’ certification 

requirements.”  Navistar and Ustian knew, but did not disclose, that just four days earlier, 

the EPA had informed Navistar that it took the opposite view:  the engine for which 

Navistar was preparing to submit its new certification application did not appear to meet 

the EPA’s certification requirements.  They also knew, but did not disclose, that Navistar 

would not be able to make all the changes the EPA said were required before submitting 

a new application.  For example, Navistar’s engine would continue to use dual mapping 

technology to keep emissions below the 0.20 NOx standard during emissions testing in a 

laboratory but above the 0.20 NOx standard when a vehicle was in motion.  Navistar’s 

statements in the December 2011 Annual Report conflicted with what the EPA had told 

Navistar, and Navistar had conveyed to Ustian, regarding its certification proposal just 

four days earlier.  Any interpretation to the contrary by Ustian of the EPA’s feedback was 

highly unreasonable.    

98. Additionally, the December 2011 Annual Report stated in pertinent part, 

in its “Risk Factors”:  

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Our solutions for meeting U.S. federal and state emissions requirements 
may not be successful or may be more costly than planned.  
 

In light of Navistar’s difficulties in developing a 0.20 NOx engine that offered 

competitive performance features, the EPA’s failure to approve Navistar’s 2011 

Application, and the EPA’s expression to Navistar of the agency’s concerns about 

Navistar’s proposed second application, Ustian knew that Navistar already had 

experienced a lack of success with its EGR-only technology.  Navistar’s statements in the 

December 2011 Annual Report conflicted with what the EPA had told Navistar, and  

Navistar had conveyed to Ustian, regarding its certification proposal just four days 

earlier.  Any interpretation to the contrary by Ustian of the EPA’s feedback was highly 

unreasonable. 

I. Navistar Submits a Second Certification Application to the EPA 
 

99. On January 31, 2012, Navistar submitted a second application to the EPA 

for certification of a 13-liter engine at the 0.20 NOx standard using EGR-only technology 

(the “January 2012 Application”). 

100. Ustian was aware of Navistar’s submission of the January 2012 

Application and was regularly updated on the development and certification work for the 

January 2012 Application both before and after it was submitted to the EPA. 

101. The EGR-only engine described in the January 2012 Application included 

dual mapping technology that required the engine to switch between Map A and Map B 

while in operation.   During testing or in idle, the engine operated in Map A.  When the 

speed increased to 0.1 miles per hour (whenever it was in motion), an Auxiliary 

Emissions Control Device (“AECD”), which Navistar called the Safe Operating Mode 

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AECD, would engage and switch the engine to Map B, during which the engine would 

operate with emissions above 0.20 NOx. 

102. On February 1, 2012, the day after Navistar submitted its January 2012 

Application, during an analyst conference, Ustian compared the fuel economy and other 

performance features of Navistar’s 13-liter EGR-only engine for certification at the 0.20 

NOx standard to the 0.50 NOx EGR-only engines Navistar was already selling, stating in 

pertinent part:  

But, as far as the customer sees on 0.2, he will not know the difference.  
That has always been the plan, and we are able to produce that now.  
Invisible.  No impact on fuel economy, no impact on performance. 
 
103. On February 17, 2012, the EPA provided Navistar with a written response 

to Navistar’s January 2012 Application.  The EPA’s written response included an email 

from the EPA to Navistar and a five-page attachment to the email with the EPA’s 

preliminary concerns on the January 2012 Application. 

104. Ustian was aware of the EPA’s February 17, 2012 response on or about 

the date on which Navistar received it. 

105. The EPA’s February 17, 2012 email in response to Navistar’s January 

2012 Application stated in pertinent part:  

After reviewing your application, our preliminary view is that Navistar’s 
application for a certificate of conformity raises several serious concerns 
that would need to be discussed and resolved before a decision could be 
made to approve the application. 
 
106. A five-page attachment to the email outlined the EPA’s concerns and set 

forth what additional information and changes to the engine or testing protocol the EPA  

likely would need from Navistar before it could approve the January 2012 Application.   

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107. One of the concerns identified by the EPA in its February 2012 response 

was whether Navistar met the 0.20 NOx standard on two certification tests.  The EPA 

told Navistar:    

[These two certification tests] appear to have been conducted without the 
Safe Mode Operation AECD active.  However, based on our 
understanding of this AECD, it would be active in-use . . . . When 
activated, this AECD switches to a high NOx calibration which exceeds 
the [Not To Exceed] limit over the entire engine operating map. Therefore, 
this engine family could not possibly comply with the NOx standard over 
the [two tests]. . . .  We should discuss whether and how the procedures 
should appropriately be changed to result in more representative 
measurements.  For example, Navistar could demonstrate that the engine 
complies over all test cycles with the AECD active as it would be under 
operating conditions typical of the cycles. 
 
108. The EPA also expressed concern that Navistar’s Safe Operating Mode 

AECD might be a “defeat device,” or a prohibited strategy that “reduces the effectiveness 

of the emission control system under conditions which may reasonably be expected to be 

encountered in normal vehicle operation and use.”  The EPA asked Navistar to justify 

why its Safe Operating Mode AECD was not a defeat device, given that “the only time 

the strategy would not be active is in the emissions test cell,” and “[i]n effect the AECD 

appears to largely disable the emission control system during almost all in-use 

operation.” 

109. Additional concerns that the EPA outlined in this email attachment related 

to some of the same issues, such as the lack of new Deterioration Factor testing, that the 

EPA had raised with Navistar in 2011 when the EPA told Navistar that it believed that 

Navistar’s 2011 Application did not meet the EPA’s certification requirements. 

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J. Navistar Engages Lobbyists and Contacts Elected Officials to 
Pressure the EPA to Approve Its Certification Application 

 
110. Shortly after receiving the EPA’s response, Ustian directed his staff to 

reach out to elected officials and their staffs regarding the challenges Navistar was facing 

in obtaining EPA certification of an EGR-only engine at the 0.20 NOx standard.   Ustian 

directed his staff to reach out to the elected officials and their staffs because he thought 

the EPA certification process in which Navistar was engaged was proving to be a lot 

tougher than it had been for Navistar in the past and was requiring more time and 

resources. 

111. On February 27, 2012, Navistar provided the EPA with an eight-page 

written reply and asked that its application be approved immediately.   Navistar’s reply 

included challenges to the EPA’s interpretation of its regulations.  Navistar submitted no 

new testing results and made no changes to its certification testing protocol or to the 

engine covered by the January 2012 Application in response to the EPA’s February 17, 

2012 response.   

112. After receiving Navistar’s reply, the EPA never indicated to Navistar that 

it agreed with any of Navistar’s arguments or that its positions on Navistar’s January 

2012 Application had changed from those it set forth in its February 17, 2012 response. 

113. On March 6, 2012, a Navistar employee in Government Relations 

contacted an elected official’s staff to schedule a meeting to discuss Navistar’s efforts to 

gain certification of an EGR-only engine at the 0.20 NOx standard. 

114. Navistar and Ustian also engaged lobbying firms and public relations 

firms to assist with their efforts to obtain certification of an EGR-only engine at the 0.20 

NOx standard.   On March 7, 2012, a public relations firm consultant sent Navistar’s 

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Chief Communications Officer “our ideas on how to put on a full court press for the U.S. 

EPA to approve our .2 engine.”  The list included outreach to numerous elected officials 

at the state and federal levels “to encourage EPA certification of the .2 engine.”     

115. Navistar had never hired lobbyists or public relations firms to contact 

elected officials or their staff members regarding EPA certification of any other pending 

certification application prior to its January 2012 Application. 

K. March 2012 Quarterly Report and Press Release 

116. On March 8, 2012, Navistar filed its quarterly report for its first fiscal 

quarter of 2012 on Form 10-Q (the “March 2012 Quarterly Report”) through the SEC’s 

publicly-available EDGAR document filing system. 

117. Ustian reviewed and approved the March 2012 Quarterly Report before 

Navistar filed it.  He also signed and certified the March 2012 Quarterly Report in his 

capacity as Navistar’s President and CEO. 

118. The March 2012 Quarterly Report stated in pertinent part:  

We reached a number of key milestones during the quarter that we believe 
will contribute to our long-term, strategic profitability goals. Advanced 
Exhaust Gas Recirculation (“EGR”), combined with other strategies, is 
our solution to meet ongoing emissions requirements.  We formally 
submitted our 0.2g NOx in-cylinder engine certification data for our 13L 
engine to the United States Environmental Protection Agency (“EPA”) on 
January 31, 2012, and to the California Air Resources Board (“CARB”) 
on February 17, 2012 (collectively, our “0.2g NOx Engine Submission”). 
These submissions are under review by EPA and CARB and we are 
engaged in ongoing discussions relating to our engine certification. 

 
119. On March 8, 2012, Navistar also issued and filed a press release regarding 

its results for its first fiscal quarter of 2012 (the “March 2012 Press Release”).  

120. Ustian also reviewed and approved, and provided a quote for, the March 

2012 Press Release before Navistar issued and filed it. 

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121. In Ustian’s quote for the March 2012 Press Release, he stated: 

Strategically, we achieved a number of key milestones in the first quarter, 
including our submission of a 0.2 NOx engine for EPA certification . . . . 
 
122. The March 2012 Quarterly Report and the March 2012 Press Release 

deceived investors when they stated that Navistar’s January 2012 Application was among 

the “milestones” that Navistar had achieved in the first quarter and when the March 2012 

Quarterly Report stated that this application would “contribute” to Navistar’s “long-term 

strategic profitability goals.”  In fact, Navistar and Ustian knew, but did not disclose, that 

Navistar already had experienced a lack of success regarding its EGR-only solution for 

certification of an engine at the 0.20 NOx standard.  They also knew, but did not disclose, 

that the EPA did not approve the 2011 Application and had told Navistar it would not 

accept aspects of the engine described in the January 2012 Application, such as the way 

Navistar’s dual mapping technology operated and Navistar’s lack of new Deterioration 

Factor test results.  Additionally, Ustian’s assessment was that the EPA certification 

process was proving to be a lot tougher for Navistar and was requiring more time and 

resources than it had in the past.  Navistar’s statements in the March 2012 Quarterly 

Report and Ustian’s quote in the March 2012 Press Release conflicted with what the  

EPA had told Navistar, and Navistar had conveyed to Ustian, regarding its January 2012 

Application.  Any interpretation to the contrary by Ustian of the EPA’s feedback was 

highly unreasonable. 

L. March 2012 Analyst Conference Call 
 
123. On March 8, 2012, Ustian and other Navistar executives conducted a 

conference call with securities analysts and the investing public (the “March 2012 

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Analyst Call”) in conjunction with Navistar’s filing of its first quarter 2012 quarterly 

report on Form 10-Q. 

124. Before taking questions from analysts during the call, Navistar disclosed 

that as part of Navistar’s revised fiscal year 2012 earnings guidance, Navistar now was 

estimating that it would pay $25 million in NCPs during the fiscal year and that certain 

warranty charges would impact Navistar’s financial performance.  

125. Later during the call, an analyst asked: “[T]hanks for the clarification on 

the $25 million NCP hit. Dan, could you . . .  let us know how many months you are 

assuming the NCP payments continue for that $25 million hit?”  Ustian responded: 

[H]ere’s maybe a way to look at it. We have submitted for the .2 and that 
goes through a process of – typically, that’s about three months, I think, is 
about the average of that. When we get the certification, it still takes some 
time for us to get to production on this. So what we are doing right now is 
getting ready to go to production, and it will be about June before we can 
get into production with that particular engine. So that kind of gives you a 
framework of where it would be. As for the preciseness of it, we can’t tell 
you, but our objective is to be in production on that in June. 
 
126. In Ustian’s response, he was referring to Navistar’s January 2012 

Application for certification of a 13-liter EGR-only engine at the 0.20 NOx standard and 

Navistar’s anticipated production of that engine after receiving a Certificate from the 

EPA. 

127. Later during the call, another analyst asked: “[S]o it sounds like most of 

these warranty issues are all engine calibrations. Is it reasonable to assume that as you 

launch out the .2 engine that this [sic] potential for this to reoccur?” Ustian responded:  

Well, I think that is a good question ...  This is why we are taking until 
June to go to production with it so that won’t happen, but I think that’s a 
fair question and we are doing the actions to prevent that from happening. 
 

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128. Ustian misled investors and analysts through the March 2012 Analyst Call 

by stating that Navistar was “taking until June” to go to production of a 13-liter EGR-

only engine that would be certified at the 0.20 NOx standard and aimed “to be in 

production on that in June,” based on a “typical” certification process timeline of “about 

three months” from the date the certification application was submitted.  In fact, Ustian 

knew, but did not disclose, that the certification process for the January 2012 Application 

was not typical, that the EPA had raised serious concerns about the application that 

Navistar had not yet resolved despite devoting more time and work than usual to the 

development and certification processes, and that Navistar and Ustian had concerns that 

certification might not occur in time for production in June.  Ustian’s statements during 

the March 2012 Analyst Call conflicted with what the EPA had told Navistar, and 

Navistar had conveyed to Ustian, regarding its January 2012 Application.  Any 

interpretation to the contrary by Ustian of the EPA’s feedback was highly unreasonable.   

129. Following Navistar’s March 2012 Analyst Call and March 2012 Quarterly 

Report, Ustian and Navistar received analyst reports showing that investors were in fact 

misled by their statements and demonstrating that their misstatements were highly 

material.  For example, one analyst noted in a March 9, 2012 report: 

The company expects to get the EPA 13L certification sometime in April-
May 2012, and further expects the 13L engine production to begin by June 
2012. . . . Our expectation is that NAV should be able to get the EPA 
certifications for 13L shortly . . . . 
 
130. Similarly, another analyst noted in a March 9, 2012 report: 

The company is targeting June for a switch over to producing fully 
compliant 13L engines.  We expect the current fine guidance is protecting 
against (normal) delays in the certification process. . . . We expect the 
catalysts to drive the shares to begin in 2Q (with EPA certification) . . . . 

 

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M.  Ustian’s Lobbying Efforts 

131. In March 2012, Navistar executives arranged for Ustian to meet with an 

elected official to ask the elected official to assist Navistar in obtaining EPA certification 

of Navistar’s EGR-only engines. Ustian’s meeting with the elected official was part of a 

broader effort by Navistar and Ustian to lobby public officials for assistance in obtaining 

a Certificate from the EPA for an EGR-only engine at the 0.20 NOx standard.  

132. On March 28, 2012, Ustian met with the elected official. Ustian told the 

elected official that Navistar had “struggled” to get an engine certified at the 0.20 NOx 

standard and that it was at a “stalemate” with the EPA.   Ustian also told the elected 

official that as a result of the EPA’s failure to certify a Navistar engine at the 0.20 NOx 

standard, Navistar was “getting to the point where we can’t ship product.”  

N. The EPA Continues to Raise Concerns Regarding Navistar’s 
Certification Application  

 
133. Throughout March and April 2012, the EPA advised Navistar that it 

continued to have concerns about Navistar’s January 2012 Application.  The EPA 

repeatedly reiterated that it could not certify Navistar’s engine if it was designed to meet 

the 0.20 NOx standard only in a testing laboratory and not in-use on the road.  For 

example, in a March 23, 2012 email that Ustian received, the EPA reiterated that “[y]ou 

cannot have one emissions control configuration for taking an EPA compliance test and a 

different emission control configuration for installation in a vehicle, if the differences 

result in measurements that are not representative of the in-use configuration.” 

134. Navistar engineers expressed skepticism that Navistar’s EGR-only engine 

could ever limit emissions to 0.20 NOx while in-use and also offer the competitive 

performance features that would make it a marketable engine.  Following an April 5, 

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2012 meeting with the EPA discussing Navistar’s efforts to certify an EGR-only engine 

at the 0.20 NOx standard, Navistar’s General Manager of Powertrain Product 

Development, who was the lead engineer for the 0.20 NOx development programs, 

described the engine in the January 2012 Application as “FUBAR forget about it!” based 

on the EPA’s feedback.  

O. Navistar Engineers Begin Work on a New Engine for Certification, 
and Navistar Withdraws Its January 2012 Application 

 
135. Following the April 5, 2012 EPA meeting, Navistar engineers worked on 

technical changes to the EGR-only engine described in the January 2012 Application that 

would result in a new certification application.  One such change was a new feature to 

replace the Safe Operating Mode AECD.  While different from the Safe Operating Mode 

AECD, this new feature continued to use dual mapping technology that resulted in the 

engine’s NOx emissions being higher when it was in a vehicle in motion on the road than 

when it was stationary in a laboratory.  The technical changes to lower emissions came at 

the expense of fuel economy and other aspects of the engine’s performance, such as 

acceleration.   

136. Navistar employees and the EPA met on April 27, 2012 to discuss 

Navistar’s changes to its EGR-only engine to receive certification at the 0.20 NOx 

standard.  During this meeting, Navistar informed the EPA of the technical changes it 

made to the engine and the resulting decrease in fuel economy and performance in this 

engine.   

137. As of May 2012, Ustian knew that any additional changes to the engine 

that the EPA might require to certify it at the 0.20 NOx standard would result in 

unacceptable performance trade-offs or require so much time for additional development 

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work that Navistar would run out of emissions credits before it could receive 

certification. 

138. On May 10, 2012, Navistar withdrew its January 2012 Application.  It was 

unusual, if not unprecedented, for Navistar to formally withdraw an application for EPA 

certification of an engine.   

P. Navistar Engages More Lobbyists and Public Relations Firms to 
Pressure the EPA to Certify its Engine 

 
139. In early May 2012, Navistar engaged additional lobbyists and public 

relations firms to provide messaging advice and to contact federal and state elected 

officials and their staffs regarding Navistar’s efforts to obtain certification of an EGR-

only engine at the 0.20 NOx standard.  

140. In a May 10, 2012 phone call with one of the public relations firms 

assisting with Navistar’s efforts to obtain certification of an EGR-only engine at the 0.20 

NOx standard, according to notes from one of the public relations consultants on the call, 

Navistar’s Vice President of Government Relations stated in pertinent part:  

In response to feedback from [an EPA official], our engineers completely 
revised the calibrations for our engine and it drastically reduced 
emissions, but it requires that we take a hit in fuel economy.  We need 
certification for our engine in May.  We will be announcing our second 
quarter earnings on June 5th, and we need to be able to say by then what 
the agency is doing, so we need the go-ahead from the EPA this month. 
 
141. On May 10, 2012, Navistar’s Chief Communications Officer emailed two 

public relations firms talking points that were being prepared for the lobbyists to use 

when contacting elected officials and their staff members.  The talking points identified a 

“devastating chain of events [that] will unfold – starting immediately” if the EPA did not 

grant certification, including,  

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It is likely that a denial of certification would become immediate news.  
Additionally, Navistar will report 2nd quarter earnings the first week of 
June and its 10K [sic] financial filing MUST include a description about 
the status of .2 certification.  The reaction of the financial marketplace 
will be swift and deep, exposing the company to myriad financial crises. 
 

(Emphasis in original).  Other predicted consequences of Navistar not receiving 

certification of an engine at the 0.20 NOx standard included the inability to sell its 

products in certain states, significant employee layoffs, and the possibility that “[t]he 

company either disappears or is acquired by one of its FOREIGN competitors.”  

(Emphasis in original). The talking points proposed as the “specific ask” that elected 

officials use “your immediate influence to have higher-level EPA officials assist [an EPA 

official] with granting Navistar .2 certification.”   

142. Throughout May 2012, lobbyists and public relations firms engaged by 

Navistar contacted numerous elected officials at the state and federal levels and their staff 

members regarding Navistar’s efforts to certify an EGR-only engine at the 0.20 NOx 

standard.   

Q. Navistar Submits a Third Certification Application to the EPA 

143. On May 21, 2012, Navistar submitted another application for certification 

of a 13-liter EGR-only engine at the 0.20 NOx standard (the “May 2012 Application”). 

144. Ustian was aware of Navistar’s submission of the May 2012 Application 

to the EPA and was regularly updated on the development and certification work for the 

May 2012 Application both before and after it was submitted to the EPA. 

145. Navistar estimated internally that its May 2012 Application engine had 

worse fuel economy than its January 2012 Application engine.  Further, the May 2012 

Application engine had worse fuel economy than 13-liter engines employing SCR 

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technology that were already being sold in the marketplace by its competitors.  Ustian 

knew these facts. 

146. As of May 2012, Ustian knew based on updates from the engineers that 

Navistar’s EGR-only engine with improved fuel economy and other performance features 

— the engine Navistar had been developing for years and that pre-dated the bridge 

program engine that was the subject of the January 2012 Application and the May 2012 

Application — was not expected to be ready for production until at least late 2013.  

Navistar projected it would run out of big bore emissions credits before then, however. 

147. In May 2012, Navistar also was projecting that the engine covered by its 

May 2012 Application would not be ready for production for several more months.  On 

May 24, 2012, Navistar’s Vice President of Government Relations sent the EPA a letter 

justifying Navistar’s continued need for NCPs.  In the letter, Navistar informed the EPA: 

Even were EPA to approve Navistar’s one 13 liter application tomorrow, 
it would still take Navistar several months to be able to ship road-ready 
engines covered by the application.   
 

(Emphasis in original.)    

148. Navistar employees met with the EPA on May 30, 2012 and June 4, 2012 

to discuss the May 2012 Application.   Between these meetings, Navistar sent the EPA 

requested testing data and information on the engine described in its May 2012 

Application, including data showing the engine’s NOx emissions when it operated in 

Map A and when it operated in Map B. 

149. During the June 4, 2012 meeting, the EPA told Navistar that the EPA 

continued to have serious concerns about Navistar’s May 2012 Application.  The 

concerns the EPA discussed included some of the same concerns that the EPA had raised 

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with Navistar regarding the January 2012 Application, such as the concern that this 

engine limited emissions to 0.20 NOx during testing in a laboratory but operated above 

the 0.20 NOx standard when in-use on the road.    

150. At the June 4, 2012 meeting, the EPA discussed Navistar withdrawing the 

May 2012 Application and NCPs being Navistar’s only option going forward.   As the 

meeting took place, Navistar’s lead engineer on the project, who was in attendance at the 

meeting, sent emails to both his supervisor and a colleague stating that the EPA’s 

response was “unequivocally NO!” to Navistar’s May 2012 Application.   

151. Immediately after leaving the June 4, 2012 EPA meeting, Navistar’s Vice 

President of Government Relations, who attended the June 4, 2012 EPA meeting, called 

Ustian to update him on what happened at the meeting.  After he finished talking to 

Ustian, Navistar’s Vice President of Government Relations updated other attendees at the 

June 4, 2012 EPA meeting about his call with Ustian.  After that update, Navistar’s lead 

engineer sent an email (in the same e-mail chain discussed in paragraph 150) to his 

supervisor and a colleague informing them: 

Dan put the gag order on us.  We are only allowed to say “the agency has 
heard everything and will reply with a written summary.”  Please 
disregard my previous communication. 
 
152. Following the June 4, 2012 meeting, the Navistar attendees sent emails 

summarizing the EPA’s feedback at the meeting.  On the night of June 4, 2012, 

Navistar’s Chief Certification Engineer sent an email to his colleagues describing their 

discussions with the EPA earlier that day, including that the EPA’s “major concern is the 

.2g design does not follow CfR [sic] part 1065.10.  In-use must produce emissions same 

as regulatory test cycles.”  Navistar’s lead engineer on the 0.20 NOx engine development 

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sent an email to his colleagues on June 5, 2012 indicating that the EPA viewed the engine 

described in Navistar’s May 2012 Application as a “blatant attempt to circumvent the 

regulations.”   

153. On June 5, 2012, Navistar’s Vice President of Government Relations, who 

attended the June 4 meeting, emailed an EPA official, stating in pertinent part:  

[W]e appreciated the opportunity to review with you and satisfactorily 
answer the remaining questions that you had on our certification 
yesterday. At the conclusion of the meeting we were surprised by your 
comments. We would like to submit questions to you based on yesterdays 
[sic] dialogue and request that you not take any further action on our .2 
certification request until we receive a response to these questions. 
 
154. Within hours of receiving the email, the EPA official responded in an 

email, stating in pertinent part:  

As I said yesterday, based on the information provided, I believe that your 
engine is unlikely to receive a certificate of conformity as it is currently 
designed . . . As we made clear previously, 40 CFR 1065.10 requires that 
engines be tested in a manner that would result in emissions rates 
equivalent to those that would result using the same engine configuration 
installed in a vehicle.  For this engine [described in the May 2012 
application], that emission result is 0.42g/hp-hr not 0.20g/hp-hr. 
 
155. Ustian received a copy of this email from the EPA on June 5, 2012. 

R. June 2012 Quarterly Report 

156. On June 7, 2012 — two days after Navistar and Ustian received the June 

5, 2012 email from the EPA — Navistar filed its quarterly report for its second fiscal 

quarter of 2012 on Form 10-Q (the “June 2012 Quarterly Report”) through the SEC’s 

publicly-available EDGAR document filing system. 

157. Ustian reviewed and approved the June 2012 Quarterly Report before 

Navistar filed it.  He also signed and certified the Quarterly Report in his capacity as 

Navistar’s President and CEO. 

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158. The June 2012 Quarterly Report stated in pertinent part:  

We submitted to the EPA an application for a 0.20g NOx engine 
certificate for one 13L engine family on January 31, 2012 and we 
submitted a similar application to CARB on February 17, 2012, but later 
withdrew both applications. In response to certain concerns raised by the 
EPA, on May 21, 2012, we submitted a revised application to the EPA and 
plan to submit a revised application to CARB. Certain issues raised by the 
revised application are under review by the EPA, and we are engaged in 
ongoing discussions relating to certification of this engine family at 0.20g 
NOx. 
 
159. The June 2012 Quarterly Report deceived investors by stating that “in 

response to certain concerns raised by the EPA” Navistar submitted the May 2012 

Application and that certain “issues” raised by the revised application merely were 

“under review.”   In fact, just days earlier, in response to the May 2012 Application, the 

EPA had informed Navistar and Ustian that Navistar’s engine was unlikely to receive 

certification based on the engine’s current design.  Navistar and Ustian knew that any 

additional changes to the engine to address the EPA’s concerns would result in 

unacceptable performance trade-offs or require so much time for additional development 

work that Navistar would run out of emissions credits before it could receive 

certification.  Navistar’s statements in the June 2012 Quarterly Report conflicted with 

what the EPA had told Navistar, and Navistar had conveyed to Ustian, regarding its May 

2012 Application.  Any interpretation to the contrary by Ustian of the EPA’s feedback 

was highly unreasonable.   

S. June 2012 Analyst Conference Call 

160. On June 7, 2012, Ustian and other Navistar executives conducted a 

conference call with securities analysts and the investing public (the “June 2012 Analyst 

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Call”) in conjunction with Navistar’s filing of its second quarter 2012 quarterly report on 

Form 10-Q. 

161. Before taking questions from analysts, Ustian stated in pertinent part:  

We have submitted, as we spoke to you before about, an application for 
certification on our Class 8 engine family, and we are continuing to work 
with the EPA on that. EPA is at – for those of you that have followed us – 
also has an NCP rule that they are finalizing. Frankly, we don’t want to 
use that. We want to get our 0.2 certification behind us and not use the 
NCP, but that is a backup that the EPA is working on. On the other hand, 
we are also getting ready as soon as that certification is approved we can 
go to instant production within 30 days. So, we have all the mechanisms in 
place to respond quickly once we get that certification approved. 
 
162. When Ustian referred to “an application for certification on our Class 8 

engine family,” he was referring to the May 2012 Application for certification of a 13-

liter EGR-only engine at the 0.20 NOx standard. 

163. Later in the call, an analyst asked: “[W]e will start with EPA engine 

certification. You said in your Q that you resubmitted that, I think, in May. Do we have 

any idea what the difference [is] between what you submitted in February and what you 

submitted in May? And what are your views on when and if this thing gets approved?  

And how much of that is built into your second-half forecast, which is just a massive 

sequential improvement?”  Ustian responded:  

Let’s define what we did there. In working with the EPA, they asked us if 
there was some spots that they wanted us to modify, and so we did that. 
And we’ve been running tests on that to make sure they meet all the 
requirements, not just of the EPA but our own requirements on 
performance, et cetera. And so we resubmitted that back to them and 
we’re in the process now of working with them on getting that certified. 
So there’s where that stands. Of course, it’s hard for us since it is 
somewhat out of our control to tell you exactly the timing of any of that so 
I hope you can appreciate that. But that’s the process we’re in right now. 
 

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The analyst followed-up with another question: “Last time we were talking about this 

you said it would be three to four months for the approval process. Does that clock start 

again now in May?”  Ustian responded in pertinent part:  

No, of course not. Again, it’s somewhat out of our control. But no, there is 
plenty of background out there now that it shouldn’t take nearly as long. I 
could argue we should have been done with this, but we are not. So we 
have to go forward and get it done expeditiously. And we’re all over the 
top of this every minute of every day, as you can imagine. And so now we 
are in that process.   
 
164. Ustian deceived investors through his misleading statements on the June 

2012 Analyst Call that “[i]n working with the EPA, they asked us if there was some spots 

we wanted to modify, and so we did that. . . . And so we resubmitted that back to them 

and we’re in the process now of working with them on getting that certified.  So that’s 

where that stands.”   Ustian’s statements indicated that Navistar had made all of the 

modifications the EPA said were required for certification and that he was unaware of 

any facts indicating that the EPA would not approve its application.  In fact, the EPA had 

just told Navistar and Ustian days before the June 2012 Analyst Call that the May 2012 

Application was unlikely to be approved based upon the current design of the engine.  

Ustian knew, but did not disclose, that Navistar had not made all of the changes the EPA 

said were required for certification.  Ustian also knew, but did not disclose, that that any 

additional changes to the engine to address the EPA’s concerns would result in 

unacceptable performance trade-offs or require so much time for additional development 

work that Navistar would run out of emissions credits before it could receive 

certification.  Ustian’s statements in the June 2012 Analyst Call conflicted with what the 

EPA had told Navistar, and Navistar had conveyed to Ustian, regarding its May 2012 

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Application.  Any interpretation to the contrary by Ustian of the EPA’s feedback was 

highly unreasonable.   

165. Ustian also deceived investors through his misleading statements during 

the June 2012 Analyst Call that “we’ve been running tests on that to make sure they meet 

all the requirements, not just of the EPA but our own requirements on performance, et 

cetera.” Ustian knew, but did not disclose, that Navistar had made technical changes to 

the engine that sacrificed fuel economy and other performance features in the engine, 

making the engine’s fuel economy and other performance features worse than Navistar’s 

existing 0.50 NOx engines.  By telling investors that Navistar was running tests to make 

sure the engine met not only the EPA’s requirements but “our own requirements on 

performance, et cetera,” Ustian misled investors into believing that the engine described 

in the May 2012 Application was commercially competitive when Ustian knew it had a 

degradation in fuel economy and performance compared to Navistar’s current EGR-only 

engines.  His statement was particularly misleading given the company’s previous 

statements, including those on February 1, 2012, about the fuel economy and other 

performance features that its 0.20 NOx engines would have.   

166. Ustian also deceived investors through his misleading statements on the 

June 2012 Analyst Call regarding the timing of certification, such as “as soon as that 

certification is approved we can go into instant production within 30 days,” his assertion 

that the certification clock did not restart in May — “No, of course not” —, “there is 

plenty of background out there now that it shouldn’t take nearly as long” and “we have to 

go forward and get it done expeditiously.  And we’re all over the top of this every minute 

of every day, as you can imagine.”  In fact, Ustian knew, but did not disclose, that the 

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EPA would not approve the engine described in the May 2012 Application as it was 

currently designed, and he was aware that any additional changes to the engine to address 

the EPA’s concerns would either result in unacceptable performance trade-offs or require 

substantial time for additional development work.  Ustian’s statements in the June 2012 

Analyst Call conflicted with what the EPA had told Navistar, and Navistar had conveyed 

to Ustian, regarding its May 2012 Application.  Any interpretation to the contrary by 

Ustian of the EPA’s feedback was highly unreasonable.   

167.  Ustian’s statement, “We want to get our 0.2 certification behind us and 

not use the NCP, but that is a backup that the EPA is working on.  On the other hand, we 

are also getting ready as soon as that certification is approved we can go into instant 

production within 30 days” was false.  Ustian knew, but did not disclose, that if 

certification were granted immediately, Navistar could not go into production on the 

engine covered by the May 2012 Application within 30 days.  In fact, his statement 

directly contradicted Navistar’s representation to the EPA on May 24, 2012 that it would 

“still take Navistar several months to be able to ship road-ready engines” even if 

certification happened the next day.  Thus, his statement that Navistar “can go into 

instant production within 30 days was false.”  Additionally, he also deceived investors by 

tying the “instant production” claim directly to concerns about the company’s continued 

payment of NCPs.  His statement that Navistar wanted to “not use the NCP” and that it 

was only “a backup” was misleading.  As the company stated in its May 24, 2012 letter to 

the EPA, even if certification were awarded the next day, Navistar still would need to pay 

NCPs while it prepared its engines for production.   

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168. Following Navistar’s June 2012 Analyst Call and June 2012 Quarterly 

Report, Ustian and Navistar received analyst reports showing that investors were in fact 

misled by their statements and demonstrating that their misstatements were highly  

material.  For example, one analyst noted in a June 12, 2012 report: 

We believe that . . . the 13L 2010 EPA certification should happen soon. . 
. .  We are maintaining our OUTPERFORM rating due to NAV’s low 
valuation.  The year 2012 will likely continue to be a messy period due to 
uncertainty and delay in the transition to EPA compliance.  However, EPA 
compliance should soon get resolved. . . .  Management commented that 
due to some concerns raised by the EPA, NAV “resubmitted data” for 
certification of its 13L engines to the EPA again on May 21, 2012.  
Management expects to get the certification soon, however, the expected 
delay is still unclear. 
 
T. Navistar Discusses Switching to SCR and Continues to 

Receive Negative Feedback from the EPA 
 

169. In the days immediately following the June 2012 Conference Call, 

Navistar engineers and Navistar senior executives advocated for Ustian to agree to 

transition to an emissions solution that used SCR technology to meet the 0.20 NOx 

standard.   On June 8, 2012, Navistar’s Director of Finance in Global Product 

Development sent Navistar’s Chief Financial Officer an analysis of the financial 

ramifications of using SCR technology to meet the 0.20 NOx standard.   On June 10, 

2012, Navistar’s Vice President of Integrated Product Development emailed other 

Navistar executives: 

*Please don’t forward* I talked to [Navistar’s Vice President of 
Government Relations] at length this AM.  He wants to use our political 
clout to convince EPA to give us time/break so that we can do SCR.  He 
does not think that EPA will give us a cert on [the May 2012 application].  
He is very very concerned and thinking the same way as the rest of the 
team. 
 

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170. During a meeting with the Executive Committee of Navistar’s Board of 

Directors held on June 11, 2012, Ustian discussed a “Plan B” for an emissions solution, 

including the use of SCR technology to meet the 0.20 NOx standard. 

171. On June 15, 2012, the EPA provided Navistar with a written response to 

Navistar’s May 2012 Application. 

172. The EPA’s written response included an email from the EPA to Navistar 

and an eight-page attachment to the email. 

173. Ustian received a copy of the EPA’s written response on June 15, 2012. 

174. The EPA’s June 15, 2012 response to Navistar’s May 2012 Application 

stated in pertinent part:  

After reviewing your application, our view is that Navistar’s application 
for a certificate of conformity raises several serious concerns that would 
prevent EPA from being able to grant a certificate of conformity. 
 
175. The eight-page attachment to the email outlined the EPA’s concerns and 

set forth what additional information the EPA believed it likely would need from 

Navistar regarding the application.  The concerns set forth in the EPA’s June 15, 2012 

response were the same concerns raised by the EPA at the June 4, 2012 meeting.   

176. One concern identified by the EPA in its June 15, 2012 response related to 

Navistar’s test results on the two tests that the EPA had raised concerns about in response 

to the January 2012 Application.  In its June 15, 2012 response, the EPA stated in 

pertinent part:  

With Map B active, NOx emissions over both test cycles exceed the 
applicable NOx standard by 60 to 115 percent. . . .  In this case, it appears 
that testing without Map B active results in unrepresentative emissions 
measurements [on these two tests and on a third laboratory test].   The 
current Map A and Map B design results in compliance with the 
applicable NOx emission standard only in the test cell and not in-use.  The 

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Map B emissions appear to be very similar to Navistar’s calibration for 
[its 0.50 NOx engines].   
 

The EPA also informed Navistar that it was assessing whether the feature that switched 

the engine from Map A to Map B when the engine was moving “raises potential concerns 

with regard to the prohibition on defeat devices.”   

177. Another of the concerns raised by the EPA in its June 15, 2012 response 

related to the lack of new Deterioration Factor testing. 

V.   Navistar’s Transition to SCR Technology and Ustian’s Departure 

178. By July 2012, Navistar had failed to obtain an EPA Certificate for an 

EGR-only engine that met the 0.20 NOx standard.   On July 6, 2012, Navistar announced 

that it would transition to a new emissions solution that incorporated SCR technology to 

meet the 0.20 NOx standard.   

179. On the day of Navistar’s announcement of its transition to SCR 

technology, its stock price closed more than 15 percent lower than its closing price on the 

previous day. 

180. In August 2012, Navistar asked Ustian to resign from the company after 

the company’s failure to obtain EPA certification at the 0.20 NOx standard for an engine 

using the EGR-only technology that Ustian had so aggressively championed.  The Board 

of Directors asked Ustian to resign because they did not believe Ustian was capable of 

leading Navistar in the development of products using SCR technology. 

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COUNT I 
 

Violations of Section 10(b) of the Exchange Act [15 U.S.C. §78j(b)] 
and Rule 10b-5 [17 C.F.R. 240.10b-5] thereunder 

 
181. The SEC realleges and incorporates by reference the allegations set forth 

in paragraphs 1 through 180 above. 

182. By virtue of the conduct alleged herein, Ustian, directly or indirectly, 

singly or in concert with others, by use of the means or instrumentalities of interstate 

commerce, or by the use of the mails, or of the facilities of a national securities exchange, 

in connection with the purchase or sale of securities, knowingly or recklessly, has: (a) 

employed devices, schemes and artifices to defraud; (b) made untrue statements of 

material facts and omitted to state material facts necessary in order to make statements 

made, in the light of the circumstances under which they were made, not misleading; 

and/or (c) engaged in acts, practices and courses of business which operated or would 

have operated as a fraud or deceit upon purchasers of securities and upon other persons. 

183. In engaging in the conduct described herein, Ustian acted knowingly or 

with a reckless disregard for the truth. 

184. By reason of the foregoing, Ustian violated, and unless enjoined will 

likely again violate, Section 10(b) of the Exchange Act [15 U.S.C. §78j(b)] and Rule l0b-

5 thereunder [17 C.F.R. § 240.10b-5].  

COUNT II 
 

Aiding and Abetting Violations of Section 10(b) of the Exchange Act [15 U.S.C. § 
78j(b)] and Rule 10b-5 thereunder [17 C.F.R. 240.10b-5]  

 
185. The SEC realleges and incorporates by reference the allegations set forth 

in paragraphs 1 through 180 above. 

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186. By virtue of the conduct alleged herein, Navistar committed primary 

violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. 

187. By reason of the foregoing and pursuant to Section 20(e) of the Exchange 

Act [15 U.S.C. § 78t(e)], Ustian aided and abetted, and is therefore liable for, the primary 

violations committed by Navistar of Section 10(b) of the Exchange Act [15 U.S.C. 

§78j(b)] and Rule l0b-5 thereunder [17 C.F.R. § 240.10b-5], because Ustian knowingly 

or recklessly provided substantial assistance to Navistar’s violations of these provisions.  

Unless enjoined, Ustian will likely again aid and abet violations of these provisions.   

COUNT III 
 

Violations of Section 17(a)(1), (2) and (3) of the Securities Act  
[15 U.S.C. § 77q(a)(1), (2) and (3)] 

 
188. The SEC realleges and incorporates by reference the allegations set forth 

in paragraphs 1 through 180 above. 

189.  By virtue of the conduct alleged herein, Ustian, directly or indirectly, 

singly or in concert with others, in the offer and sale of securities, by use of the means 

and instruments of transportation and communication in interstate commerce and by use 

of the mails, has: (a) employed devices, schemes or artifices to defraud; (b) obtained 

money or property by means of untrue statements of material fact or omissions to state 

material facts necessary in order to make the statements made, in light of the 

circumstances under which they were made, not misleading; and/or (c) engaged in 

transactions, practices or courses of business which operate or would operate as a fraud 

or deceit upon the purchaser.  

190. In engaging in the conduct described herein, Ustian acted knowingly 

and/or with a reckless disregard for the truth. 

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191. In engaging in the conduct described herein, Ustian acted negligently. 

192. By reason of the foregoing, Ustian has violated, and unless enjoined will 

likely again violate, Sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Securities Act [15 

U.S.C. § 77q(a)(1), § 77q(a)(2) and § 77q(a)(3)].  

COUNT IV 
 

Aiding and Abetting Violations of Section 17(a)(1), (2) and (3) of the Securities Act  
[15 U.S.C. § 77q(a)(1), (2) and (3)] 

 
193. The SEC realleges and incorporates by reference the allegations set forth 

in paragraphs 1 through 180 above. 

194.  By virtue of the conduct alleged herein, Navistar committed primary 

violations of Sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Securities Act. 

195. By reason of the foregoing and pursuant to Section 15(b) of the Securities 

Act [15 U.S.C. § 77o(b)], Ustian aided and abetted, and is therefore liable for, the 

primary violations committed by Navistar of Sections 17(a)(1), 17(a)(2) and 17(a)(3) of 

the Securities Act [15 U.S.C. § 77q(a)(1), § 77q(a)(2) and § 77q(a)(3)] because Ustian 

knowingly or recklessly provided substantial assistance to such entity’s violations of 

these provisions.  Unless enjoined, Ustian will likely again aid and abet violations of 

these provisions. 

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COUNT V 
 

Aiding and Abetting Violations of Section 13(a) of the Exchange Act [15 U.S.C. 
78m(a)] and Exchange Act Rules 12b-20 [17 C.F.R. § 240.12b-20], 13a-1 [17 C.F.R. § 

240.13a-1], 13a-11 [17 C.F.R. § 240.13a-11] and 13a-13 [17 C.F.R. § 240.13a-13] 

 
196. The SEC realleges and incorporates by reference the allegations set forth 

in paragraphs 1 through 180 above. 

197. Section 13(a) and Rules 13a-1, 13a-11, and 13a-13 thereunder, require 

issuers of registered securities to file with the SEC factually accurate annual and 

quarterly reports (Form 10-K and Form 10-Q) and certain current information with the 

SEC (Form 8-K).  Rule 12b-20 further provides that, in addition to the information 

expressly required to be included in a statement or report, there shall be added such 

further material information, if any, as may be necessary to make the required statements, 

in light of the circumstances under which they were made, not misleading. 

198. By virtue of the conduct alleged herein, Navistar committed violations of 

Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11 and 13a-13 

thereunder. 

199. By reason of the foregoing and pursuant to Section 20(e) of the Exchange 

Act [15 U.S.C. § 78t(e)], Ustian aided and abetted, and is therefore liable for, the primary 

violations committed by Navistar of Section 13(a) of the Exchange Act and Rules 12b-

20, 13a-1, 13a-11 and 13a-13 thereunder, because Ustian knowingly or recklessly 

provided substantial assistance to Navistar’s violations of these provisions.  Unless 

enjoined, Ustian will likely again aid and abet violations of these provisions.  

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COUNT VI 
 

Violations of Exchange Act Rule 13a-14 [17 C.F.R. § 240.13a-14] 
 

200. The SEC realleges and incorporates by reference the allegations set forth 

in paragraphs 1 through 180 above. 

201. As the principal executive officer of Navistar, Ustian was required to, and 

did, sign and certify Navistar’s annual report on Form 10-K for 2011, and its quarterly 

reports on Form 10-Q for its 2012 fiscal quarters.  Among other things, Ustian certified 

that the reports did not contain any untrue statement of material fact or omit to state a 

material fact necessary to make the statements made not misleading.  The certifications 

were materially false. 

202. By virtue of the conduct alleged herein, Ustian violated Exchange Act 

Rule 13a-14 [17 C.F.R. § 240.13a-14]. 

COUNT VII 

Control Person Liability 
Section 20(a) of the Exchange Act [15 U.S.C. § 78t(a)] 

203. The SEC realleges and incorporates by reference the allegations set forth 

in paragraphs 1 through 180 above. 

204. By virtue of the conduct alleged herein, Navistar committed violations of 

Sections 10(b) [15 U.S.C. §78j(b)] and 13(a) [15 U.S.C. 78m(a)] of the Exchange Act 

and Rules l0b-5 [17 C.F.R. § 240.10b-5], 12b-20 [17 C.F.R. § 240.12b-20], 13a-1 [17 

C.F.R. § 240.13a-1], 13a-11[17 C.F.R. § 240.13a-11] and 13a-13 [17 C.F.R. § 240.13a-

13] thereunder. 

205. As set forth above, during the relevant period, Ustian directly or 

indirectly, controlled Navistar. 

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206. Pursuant to Section 20(a) of the Exchange Act [15 U.S.C. § 78t(a)], Ustian 

is liable as a control person for Navistar’s violations of Sections 10(b) [15 U.S.C. 

§78j(b)] and 13(a) [15 U.S.C. 78m(a)] of the Exchange Act and Rules l0b-5 [17 C.F.R. § 

240.10b-5], 12b-20 [17 C.F.R. § 240.12b-20], 13a-1 [17 C.F.R. § 240.13a-1], 13a-11[17 

C.F.R. § 240.13a-11] and 13a-13 [17 C.F.R. § 240.13a-13] thereunder. 

207. Pursuant to Section 20(a) of the Exchange Act [15 U.S.C. § 78t(a)], Ustian 

is liable jointly and severally with and to the same extent as Navistar for Navistar’s 

violations. 

RELIEF REQUESTED 

WHEREFORE, the Commission respectfully requests that the Court: 

I. 
 Injunctive Relief 

 Issue an Order of Permanent Injunction, in a form consistent with Rule 65(d) of 

the Federal Rules of Civil Procedure, permanently restraining and enjoining Ustian, his 

officers, agents, servants, employees, attorneys and those persons in active concert or 

participation with them who receive actual notice of the Order, by personal service or 

otherwise, and each of them from, directly or indirectly, engaging in the transactions, 

acts, practices or courses of business described above, or in conduct of similar purport 

and object, in violation of Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)]; and 

Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rules 10b-5 [17 C.F.R. § 

240.10b-5] and 13a-14 [17 C.F.R. § 240.13a-14] thereunder, and from aiding and 

abetting violations of Section 13(a) of the Exchange Act [15 U.S.C. § 78m(a)] and 

Exchange Act Rules 12b-20, 13a-1, 13a-11 and 13a-13 [17 C.F.R. §§ 240.12b-20, 

240.13a-1, 240.13a-11 and 240.13a-13]. 

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II. 
Disgorgement with Prejudgment Interest 

 
Issue an Order requiring Ustian to pay disgorgement of ill-gotten gains that he 

received, directly or indirectly, as a result of his wrongful conduct set forth in this 

Complaint, including prejudgment interest. 

III. 
Civil Penalty 

 
Issue an Order imposing an appropriate civil penalty upon Ustian pursuant to 

Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)] and Section 20(d) of the 

Securities Act [15 U.S.C. § 77t(d)]. 

IV. 
Officer and Director Bar 

 
Issue an Order imposing an officer and director bar pursuant to Section 21(d)(2) 

of the Exchange Act [15 U.S.C. § 78u(d)(2)]. 

V. 
Retention of Equitable Jurisdiction 

 
Retain jurisdiction of this action in accordance with the principles of equity and 

the Federal Rules of Civil Procedure in order to implement and carry out the terms of all 

orders and decrees that may be entered or to entertain any suitable submission or motion 

for additional relief within the jurisdiction of this Court. 

VI. 
Other Relief 

Grant such orders for further relief the Court deems appropriate. 

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JURY DEMAND 

The Commission requests a trial by jury. 

Dated: March 31, 2016    Respectfully submitted, 
 

UNITED STATES SECURITIES 
AND EXCHANGE 
COMMISSION 

 
/s Anne Graber Blazek 
______________________________ 

       By: One of its Attorneys 
 
 
 
 
Eric M. Phillips 
Jonathan S. Polish 
Amy Flaherty Hartman  
Anne Graber Blazek  
Timothy Stockwell  
United States Securities and Exchange Commission 
175 West Jackson Boulevard 
Ninth Floor 
Chicago, Illinois 60604 
Telephone: (312) 353-7390 

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