* Navistar says Deloitte's bad advice caused restatement
* Navistar has said restatement cost nearly $2 bln pretax
* Deloitte said law suit is "utterly false" (Adds response from Deloitte)
By Jonathan Stempel
NEW YORK, April 26 Navistar International Corp (NAV.N), the maker of heavy-duty trucks and engines, sued Deloitte & Touche LLP on Tuesday for more than $500 million, saying its former auditor's bad accounting advice forced it to restate nearly three years of results.
In a lawsuit filed in an Illinois state court in Chicago, Navistar said Deloitte, under pressure from federal regulators, "ran away" from accounting advice it had given over the years, and from clean audit opinions it had issued from 2002 to 2005.
Navistar fired Deloitte as its auditor in April 2006 after a 98-year relationship, and hired KPMG LLP.
Jonathan Gandal, a Deloitte spokesman, called the lawsuit "an utterly false and reckless attempt to try to shift responsibility for the wrongdoing of Navistar's own management."
He said Navistar's claim has no merit, and that Deloitte will defend itself vigorously.
It later restated results for its 2003 and 2004 fiscal years and the first three quarters of its 2005 fiscal year to correct underpayment of income taxes and how it booked pension and warranty reserves.
Navistar has said it booked nearly $2 billion of pretax charges and additional income tax owed, and that delays in filing its 2005 financials forced it to refinance debt "at great cost" and be delisted from the New York Stock Exchange.
"Deloitte lied to Navistar ... as to the competency of its audit and accounting services," the 134-page complaint said.
"In fact, unbeknownst to Navistar, Deloitte's internal quality control problems were so pervasive that the chance of 'competent' accountants and auditors being assigned to Navistar's and Deloitte's other clients was as random as roulette," Navistar added.
The lawsuit also accuses Deloitte of fraud and negligence. It seeks compensatory damages, punitive damages and other remedies.
Clay Perschall, a Deloitte spokesman, did not immediately return calls seeking comment.
In October 2007, Navistar Chief Executive Daniel Ustian said an internal probe had found weaknesses in "the skill set of our people and the knowledge that they had of what proper accounting is."
Two years later, the Warrenville, Illinois-based company said it had settled a U.S. Securities and Exchange Commission probe into the restatement. Navistar did not pay a fine, but said Ustian agreed to give back some of his 2004 bonus.
Navistar has regained its Big Board listing. Its shares closed Tuesday up $1.45, or 2.1 percent higher, at $70.17.
The case is Navistar International Corp v. Deloitte & Touche LLP, Circuit Court of Cook County, Illinois, No. 2011-L-004269. (Reporting by Jonathan Stempel in New York; Editing by Tim Dobbyn)