Archers-Daniels-Midland has agreed to pay $40 million to resolve a Securities and Exchange Commission investigation into its accounting practices.
The SEC filed an order Tuesday instituting cease-and-desist proceedings which laid out the terms of the agreement. It alleges former ADM Nutrition CFO Vikram Luther and Vince Macciocchi, Nutrition’s former president, “led a series of transactions that inflated Nutrition’s operating profit at the expense of ADM’s other segments.”
It also claims former CFO Ray Young “acted negligently in overseeing and approving certain transactions, and that all three men worked to make “improper adjustments to sales between ADM’s business segments that boosted Nutrition’s operating profit in 2019, 2021, and 2022.”
"As a result, ADM’s periodic reports filed with the commission contained materially false and misleading statements concerning Nutrition’s financial condition and results of operations,” SEC Secretary Vanessa A. Countryman wrote in the order.
More specifically, SEC’s filing claimed that certain ADM compensation plans were partially tied to the performance of the Nutrition business segment, and despite public promotion by management of “Nutrition’s strong overall performance and growth prospects,” the segment “repeatedly struggled to meet expectations.”
It claims the three employees, with varying degrees of involvement, made “a series of adjustments to inter-segment transactions that improved Nutrition’s operating profit to the detriment of" operating profits for two other segments, Ag Services and Oilseeds and Carbohydrate Solutions.
The SEC filed "settled charges" against Macciocchi and Young. Macciocchi will pay a $125,000 penalty, along with $330,000 for disengagement, and $74,343 for prejudgment interest, according to the document. Meanwhile, Young will pay a $75,000 penalty, along with $450,000 for disengagement and $125,610 in prejudgment interest.
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An ADM press release says ADM has “implemented significant changes to its financial leadership team and financial controls,” and that the transactions addressed in the SEC resolution “affected segment-level reporting and had no impact on the Company’s reported consolidated balance sheet, earnings or cash flows for the periods presented in the restated filings."
According to the SEC's release, the agreement ends its investigation into the company, although the commission also filed a civil complaint against Luthar. The Justice Department has agreed to close an investigation into ADM.
"We are pleased to put these matters behind the company,” ADM Board Chair, President and CEO Juan Luciano said in a release. "These past couple of years have underscored what’s core to ADM – incorporating learnings to further strengthen our business. This is reflected in the extensive actions we have taken to enhance our internal controls and ensure accuracy of our financial reporting. Looking ahead, we remain committed to operating with transparency and integrity and upholding the trust of our stakeholders every day.”
The SEC's civil complaint charges Luthar with violating anti-fraud laws and seeks permanent injunctions, an officer and director bar, disgorgement of ill-gotten gains with prejudgment interest, civil penalties, and reimbursement of certain executive compensation to ADM under the Sarbanes-Oxley Act.
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