SEC Charges ADM With $40 Million Settlement Over Nutrition Segment Accounting Fraud

ADM allegedly manipulated transactions between its Nutrition unit and other business segments to meet investor growth projections of 15% to 20% annual operating profit increases for the Nutrition business from 2019 through 2022. The scheme involved retroactive rebates and price changes that were not customarily available to third-party customers and functioned as "essentially one-sided transfers of operating profit to Nutrition," according to the SEC.

The SEC filed separate charges against three former ADM executives. Vikram Luthar faces ongoing litigation for allegedly orchestrating the scheme, while Vince Macciocchi and Ray Young settled their cases without admitting or denying the findings. Macciocchi agreed to pay disgorgement and prejudgment interest totaling $404,343 and a civil penalty of $125,000, plus accept 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 for negligently approving improper adjustments.

According to the SEC's order, Luthar directed "adjustments" to Nutrition's transactions with other ADM business segments when the unit was falling short of operating profit targets for fiscal years 2021 and 2022. These adjustments were targeted to specific dollar amounts designed to help Nutrition hit its operating profit goals or mask shortfalls.

The enforcement action found that ADM overstated Nutrition's operating profit for fiscal years 2019, 2021, and 2022, making the company's annual and quarterly reports false and misleading. ADM had represented that intersegment transactions were recorded at amounts "approximating market."

"Transparent and honest disclosure are key to maintaining market integrity, so when ADM misled its investors, the SEC stepped in to protect them and the market," said Margaret A. Ryan, Director of the SEC's Division of Enforcement.

The SEC credited ADM's cooperation in reaching the settlement, noting the company conducted an internal investigation, voluntarily reported findings to SEC staff, and implemented new internal accounting controls around intersegment transactions. The $40 million penalty will be distributed to harmed investors through a Fair Fund.