The agency filed settled charges against ADM, former executive Vince Macciocchi, and former executive Ray Young, while pursuing a litigated action against former executive Vikram Luthar. The charges involve conduct in fiscal years 2019, 2021, and 2022. According to the complaint, Nutrition was falling short of the 15% to 20% per year operating profit growth that Luthar and other ADM executives had projected to investors for fiscal years 2021 and 2022.
According to the complaint, Luthar directed adjustments to Nutrition's transactions with other ADM business segments — including retroactive rebates and price changes not customarily available to ADM's third-party customers — that were essentially one-sided transfers of operating profit to Nutrition. The SEC's settled order finds that Macciocchi and Luthar led efforts to identify and structure those adjustments for fiscal years 2021 and 2022, and that Young negligently approved improper adjustments for fiscal years 2019 and 2021. The adjustments were targeted to specific dollar amounts to hit Nutrition's operating profit goals or mask a shortfall, and were not provided to third parties.
The complaint alleges, and the order finds, that the adjustments rendered ADM's annual and quarterly reports false and misleading because the adjustments resulted in transactions inconsistent with ADM's representation that intersegment transactions were recorded at amounts "approximating market." The order further finds that ADM overstated Nutrition's operating profit for fiscal years 2019, 2021, and 2022, the third quarter of 2019, and all quarters in 2021.
Under the settlement, ADM agreed to pay a $40,000,000 civil penalty. Macciocchi agreed to pay disgorgement and prejudgment interest totaling $404,343 and a civil penalty of $125,000, and also accepted a three-year officer and director bar. Young agreed to pay disgorgement and prejudgment interest totaling $575,610 and a civil penalty of $75,000. None of the settling parties admitted or denied the findings.
The SEC credited ADM's cooperation in accepting the settlement. The company conducted an internal investigation, voluntarily reported its findings to SEC staff, provided additional analyses from an outside accounting expert, implemented new internal accounting controls around intersegment transactions, amended its policies and procedures, and tested the effectiveness of its new controls. The order creates a Fair Fund to distribute the monetary relief to investors harmed by the violations.
The litigated complaint against Luthar, filed in the U.S. District Court for the Northern District of Illinois, charges him with violating the antifraud provisions of the federal securities laws, aiding and abetting ADM's violations of the antifraud, reporting, books and records, and internal accounting control provisions of the federal securities laws, and failing to reimburse ADM for certain executive compensation as required under the Sarbanes-Oxley Act. The SEC is seeking 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.