Monsanto agrees to $80M penalty for misstating Roundup-related earnings

By Daniel Enoch

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WASHINGTON, Feb. 9, 2016 -- Monsanto has agreed to pay an $80 million penalty and retain an independent compliance consultant to settle charges that it violated accounting rules and misstated company earnings as it pertained to its flagship product Roundup, the Securities and Exchange Commission said today in a release. Three accounting and sales executives also agreed to pay penalties to settle charges against them. 

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SEC said its investigation found that Monsanto had insufficient internal accounting controls to properly account for millions of dollars in rebates offered to retailers and distributors of Roundup after generic competition had undercut Monsanto's prices and resulted in a significant loss of market share for the company. Monsanto booked substantial amounts of revenue resulting from sales incentivized by the rebate programs, but failed to recognize all of the related program costs at the same time.  Therefore, Monsanto materially misstated its consolidated earnings in corporate filings during a three-year period, according to the SEC.

Monsanto and the three employees involved consented to the SEC's order without admitting or denying the findings that it violated federal laws, the agency said.

“Monsanto devised rebate programs that elevated form over substance, which led to the booking of substantial amounts of revenue without the recognition of associated costs,” said Scott W. Friestad, associate director in the SEC's Division of Enforcement. “Public companies need to have robust systems in place to ensure that all of their transactions are recognized in the correct reporting period.”

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The investigation found no personal misconduct by Monsanto CEO Hugh Grant and former CFO Carl Casale, who reimbursed the company $3,165,852 and $728,843, respectively, for cash bonuses and certain stock awards they received during the period when the company committed accounting violations, SEC said. Therefore, it wasn't necessary for the agency to pursue a clawback action under the Sarbanes-Oxley Act.

In a statement, Monsanto said the agreement with the SEC fully resolves the previously disclosed investigation into financial reporting in fiscal years 2009, 2010 and 2011. It also notes that the investigation was first disclosed by the company in 2011.

“Monsanto is committed to operating its business with the utmost integrity and transparency and in compliance with all applicable laws and regulations” the company said.

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