ADM agreed to pay a $40 million civil penalty and establish a Fair Fund to distribute proceeds to harmed investors, the SEC said. Former executives Vince Macciocchi and Ray Young agreed to pay penalties and disgorgement totaling $529,343 and $650,610, respectively. Macciocchi also accepted a three-year officer and director bar.
According to the SEC, former executive Vikram 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. The agency alleged the adjustments included retroactive rebates and price changes not customarily available to third-party customers.
The transactions functioned as "essentially one-sided transfers of operating profit to Nutrition," the SEC said, with the goal of making it appear the segment was meeting the 15% to 20% annual operating profit growth ADM had projected to investors.
The SEC's order finds that Macciocchi and Luthar led efforts to identify and structure the adjustments for fiscal years 2021 and 2022, while Young negligently approved improper adjustments for fiscal years 2019 and 2021. The adjustments rendered ADM's reports false and misleading because they conflicted with the company's representation that intersegment transactions were recorded at amounts "approximating market," according to the order.
The SEC credited ADM's cooperation, noting the company conducted an internal investigation, voluntarily reported findings, and provided additional analyses from an outside accounting expert. ADM also implemented new internal accounting controls around intersegment transactions.
The litigation against Luthar in the U.S. District Court for the Northern District of Illinois seeks permanent injunctions, an officer and director bar, disgorgement with prejudgment interest, civil penalties, and reimbursement of executive compensation under the Sarbanes-Oxley Act.
"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.