(Reuters) -- Navistar International Corp. agreed to pay a $7.5 million fine to settle U.S. Securities and Exchange Commission charges that it defrauded investors into believing a diesel truck engine it was developing could meet tough federal emissions standards.

The SEC also filed a related lawsuit accusing former Navistar Chief Executive Daniel Ustian of leading a "campaign of deception" to defraud investors in 2011 and 2012.

Navistar did not admit or deny wrongdoing. The Lisle, Illinois-based company said that it settled to avoid the cost and distraction of litigation, and that "it was time to put this matter behind us."

Mr. Ustian has not settled. A lawyer representing him did not immediately respond to requests for comment on the lawsuit, which was filed in federal court in Chicago.

Shares of Navistar fell 19 cents, to $12.50, in afternoon trading on the New York Stock Exchange.

The case arose from Navistar's failure to win Environmental Protection Agency approval of a heavy-duty diesel truck engine designed to meet Clean Air Act standards adopted in 2010.

According to the SEC, Navistar spent more than $700 million to develop special "exhaust gas recirculation" (EGR) technology to reduce nitrous oxide emissions, only to abandon the effort in July 2012 and settle for technology used by its rivals.

The SEC said Mr. Ustian had led a "progressively desperate and fraudulent scheme" through news releases, conference calls and regulatory filings to deceive investors into believing that EPA certification was "right around the corner."

It said that as late as June 2012, Mr. Ustian signaled that feedback from the EPA suggested that certification might come soon, despite knowing that the agency had refused to certify a proposed engine the prior month.

The SEC said Navistar's lead engineer on the project had written in a June 4, 2012, email that the EPA response had been "unequivocally NO!," but soon retracted that email upon learning that "Dan put the gag order on us."

Navistar shares tumbled 15.2 percent on July 6, 2012, when it announced it was abandoning the EGR technology, the SEC said. Mr. Ustian resigned the next month.

The lawsuit against Mr. Ustian seeks civil penalties, a ban on his serving as an officer or director of public companies, and other remedies.

The case is SEC v. Ustian, U.S. District Court, Northern District of Illinois, No. 16-03885.