Welcome to the website for the UPS Fair Fund.
If you purchased or acquired United Parcel Service (“UPS”) Class A or Class B common stock (“Equity Securities”) or certain United Parcel Service bonds (“Debt Securities”) (together, the “Securities”) during the period between October 22, 2019, and January 24, 2021, inclusive (the “Relevant Period”), you may be entitled to a Distribution Payment from the UPS Fair Fund.
Background:
On November 22, 2024, the Commission issued an Order Instituting Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order (the “Order”) against United Parcel Service, Inc. (the “Respondent” or “UPS”). The Commission found that UPS failed to adhere to the basic accounting principle that the “fair value” of an asset is the price that would be received in the sale of that asset in an orderly transaction between market participants. UPS’s failures resulted in material misrepresentations to investors regarding its earnings and other reported items and activities.
According to the Order, in 2019, UPS’s corporate strategy group conducted an analysis of UPS Freight (“Freight”). Although UPS was carrying the business on its balance sheet at $1.4 billion, the 2019 analysis, which was available prior to the company’s annual goodwill impairment test, concluded Freight was likely to sell for only about $350 million to $650 million and reflected that the nearly $500 million of goodwill associated with Freight was impaired. The Commission found that when conducting the goodwill impairment testing required by Generally Accepted Accounting Principles (“GAAP”) in 2019, UPS ignored the company’s own assessment of Freight’s fair value. Instead, it relied on a valuation estimate of $2 billion prepared by an external consultant to support the carrying value UPS had assigned to Freight without giving the consultant the information it needed to fairly value the business. The Commission found that UPS relied on this valuation and did not record a goodwill impairment. Commission staff economists calculated that UPS’s failure to properly record a goodwill impairment caused UPS’s share price to be artificially inflated and UPS’s bond yields to be artificially depressed during the Relevant Period.
Equity investor losses occurred when UPS publicly disclosed on January 25, 2021, that it had reached an agreement to sell Freight for $650 million less than its $1.3 billion carrying value. Equity investors who had purchased the shares when the carrying value was misstated and then sold once the agreement was disclosed were harmed because they purchased shares at inflated prices. Bond investor losses occurred throughout the Relevant Period as bondholders received a lower yield than they otherwise would have.
The Commission ordered the Respondent to pay a $45,000,000 civil money penalty to the Commission. The Commission also created the Fair Fund, pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, so the penalty collected can be distributed to harmed investors (the “UPS Fair Fund” or “Fair Fund”).
The Respondent has paid in full. The Fair Fund has been deposited in a Commission-designated account at the United States Department of the Treasury, and any accrued interest will be added to the Fair Fund.