The enforcement action resulted in a $40 million civil penalty for ADM and additional sanctions against former executives Vince Macciocchi and Ray Young, who settled, while the SEC filed a litigated complaint against former executive Vikram Luthar in federal court in Chicago. The charges stem from alleged accounting manipulation in ADM's Nutrition segment during fiscal years 2019, 2021, and 2022, when executives allegedly used improper "adjustments" to meet the 15% to 20% annual operating profit growth targets they had projected to investors.
According to the SEC's complaint against Luthar, he directed retroactive rebates and price changes in transactions between Nutrition and other ADM business segments that were "essentially one-sided transfers of operating profit to Nutrition, with the goal of making it appear that Nutrition was meeting" its growth targets. The SEC's settled order against ADM, Macciocchi, and Young finds that these adjustments were "targeted to specific dollar amounts to hit Nutrition's operating profit goals or mask a shortfall" and were not provided to third-party customers, making them inconsistent with ADM's representations that intersegment transactions were recorded at amounts "approximating market."
Under the settlement, ADM will pay the $40 million penalty into a Fair Fund for distribution to harmed investors, while Macciocchi agreed to disgorgement and interest totaling $404,343 plus a $125,000 penalty and accepted a three-year officer and director bar. Young will pay disgorgement and interest of $575,610 and a $75,000 civil penalty.
The SEC credited ADM's cooperation in accepting the settlement, noting the company conducted an internal investigation, voluntarily reported findings to staff, and provided analyses from an outside accounting expert. ADM also implemented new internal accounting controls around intersegment transactions, amended its policies and procedures, and tested the effectiveness of its new controls. Meanwhile, Luthar faces potential permanent injunctions, an officer and director bar, disgorgement with interest, civil penalties, and required reimbursement of executive compensation under Sarbanes-Oxley Act clawback provisions.
"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 is steadfast in its commitment to rooting out fraud and holding accountable wrongdoers, while also engaging market participants constructively to ensure the right outcomes are achieved in a timely and fair manner."