ADM pays $40 million to US SEC in settlement and avoids criminal charges
Grain trader Archer-Daniels-Midland Company has ?agreed to pay a $40 million civil penalty to settle charges from the U.S. Securities and Exchange Commission that it ?inflated ?the performance of a key business segment, the regulator said on Tuesday.
ADM settled without admitting any wrongdoing and stated that the Justice Department had closed its investigation, which it conducted independently.
The agreement marks the end of a scandal that lasted for years and forced the company - one of the largest agricultural traders in the world - to revise twice its financial statements. It also led to heavy losses on shares and shareholder lawsuits.
The SEC filed charges against two top executives and sued ADM's former chief financial officer Vikram Lutehar on separate grounds for his alleged role in the fraudulent adjustments.
Ray Young (who was ADM CFO from 2022 to 2022) and former Nutrition Business Unit President Vince Macciocchi are included in the SEC settlement. Macciocchi agreed to pay over $529,000 for fines and fees. Young will pay $650,000.
The SEC's complaint against Luthar was filed in the Northern District of Illinois, a U.S. District Court for the Northern District of Illinois accuses Luthar of violating federal securities laws, by helping ADM to mislead its investors and failing to report and account for the activities of the company.
Regulators claim he was involved in fraudulent conduct and helped ADM to violate rules. He also allegedly benefited from the fraud. The SEC wants to ban Luthar as an officer or a director of a?public company and make him pay a fine and other fees.
Luthar’s lawyer Junaid Zubairi branded the accusations "meritless", and claimed that ADM's investigation had found that Luthar did not act improperly.
ADM's lawyer declined to make any further comments. Macciocchi's lawyer declined to comment, and Young's lawyer did not immediately respond to a comment request.
The U.S. Attorney's Office Manhattan did not respond immediately to requests for comments on the closure of the criminal case.
On the website of the company, CEO Juan Luciano stated that the company was pleased to have put this matter behind it and had taken "extensive measures" to improve internal controls.
ADM's shares were almost unchanged in Tuesday's after-hours trading.
A PROBE CENTERED UPON NUTRITION UNIT
Federal prosecutors began an investigation in early 2024 on accounting issues at ADM related to its much-touted "Nutrition Unit", as previously reported. Luthar was fired after the government investigation and an internal inquiry.
The ADM investigation was based on internal transactions which inaccurately reported financial data for the "Nutrition Unit", launched in 2018 with the aim of accelerating the?development and production of high-value special ingredients for food, beverages, and animal feed industries.
ADM reduced the Nutrition operating profit by $228 million between 2018 and 2023 due to revisions. This is according to company filings.
Luciano was under pressure when news of the?irregularities in accounting broke early in 2024. The top executive's compensation had been tied to the growth of the Nutrition unit.
The investigation into the "intersegmentation" transactions between ADM's business units focused on whether ADM intentionally boosted Nutrition’s performance by supplying it with goods at below-cost from other company divisions.
In a press release, the SEC said that it considered ADM’s "cooperation" in accepting the settlement proposal.
The company, in particular, conducted an internal audit, reported its findings voluntarily to the agency staff and provided them with an additional analysis from an external accounting expert.
The SEC stated that ADM remedial measures included, among others, implementing new accounting controls for intersegment operations, amending policies and procedures and testing the effectiveness its new controls.
(source: Reuters)
