Food giant Archer-Daniels-Midland Co. (ADM) is paying US$40 million to settle allegations of accounting and disclosure fraud from the U.S. Securities and Exchange Commission (SEC).
The SEC settled charges with the company and two executives, alleging that they manipulated the performance of a key business segment to make it appear as though the unit was meeting its operating profit growth targets. A third executive has not settled and will litigate the regulator’s action.
According to the SEC’s complaint, in fiscal 2021 and 2022, when the company’s “nutrition” unit was falling short of its growth targets, the company and the executives ordered “adjustments” to inter-company transactions to boost that division’s results, with the goal of making it appear that the nutrition business was meeting the goals projected to investors.
As a result of the adjustments, the regulator alleged, the company’s annual and quarterly reports for those years were “false and misleading”.
The settlement with ADM and two of its former executives finds that they violated the “antifraud, reporting, internal accounting controls, and books and records provisions” of federal securities laws.
Without admitting or denying the findings, they agreed to settle the case, with ADM paying US$40 million and the executives paying a total of US$1.18 million in disgorgement and civil penalties. One of the executives also agreed to a three-year director and officer ban.
The settlement order creates a fund that will distribute the money collected to harmed investors.
The SEC said it “considered ADM’s cooperation and significant remedial measures in accepting its settlement offer.”
To that end, it noted that the company carried out an internal investigation, voluntarily reported its findings to the SEC and took action to beef up its internal controls to prevent similar violations in the future.
Alongside the settlement, the SEC also filed a complaint in the U.S. district court for the Northern District of Illinois charging a third former ADM executive with various securities law violations. In that case, it’s seeking disgorgement, civil penalties, the repayment of executive compensation, and an officer and director ban.
The allegations in that action have not been proven.