ADM to Pay $40 Million SEC Penalty Over Inflated Financial Performance; DOJ Closes Criminal Probe
Archer-Daniels-Midland (ADM) will pay a $40 million civil penalty to the U.S. Securities and Exchange Commission (SEC). This settlement comes after charges that the company inflated the financial performance of a key business segment. Separately, the U.S. Department of Justice (DOJ) has concluded its related criminal probe without bringing charges.
These resolutions bring an end to years-long government investigations into accounting issues at ADM. The company had previously been required to revise its financial reports twice and faced shareholder litigation stemming from these problems. The settlement includes charges against former executives Vince Macciocchi and Ray Young.
ADM's Response and Enhanced Controls
ADM's CEO, Juan Luciano, stated the company is pleased to resolve the matter. He emphasized that ADM has implemented extensive actions aimed at enhancing its internal controls.
ADM's CEO, Juan Luciano, stated the company is pleased to resolve the matter and has implemented extensive actions to enhance internal controls.
The Nutrition Unit Investigation
Federal prosecutors initiated a probe in early 2024 into accounting irregularities concerning ADM's Nutrition unit. This unit, launched in 2018, was established to develop specialty ingredients. The investigation, along with an internal inquiry, led to the departure of ADM's former chief financial officer.
The investigation primarily focused on internal company transactions that inaccurately reported the Nutrition unit's financial results. Specifically, it examined whether ADM deliberately boosted the unit's performance by providing it with below-cost goods from other company segments.
The investigation focused on internal company transactions that inaccurately reported the Nutrition unit's financial results.
News of these accounting issues in early 2024 resulted in a decline in ADM's share price. It also led to heightened scrutiny of top executives, whose compensation was directly linked to the Nutrition unit's growth.
Company Cooperation with SEC
The SEC noted ADM's cooperation in accepting the settlement. This included the company conducting an internal investigation, voluntarily reporting its findings, and providing additional analyses from an outside accounting expert. Furthermore, ADM implemented new internal accounting controls for intersegment transactions, amended relevant policies, and tested the effectiveness of its new controls.