On Tuesday, the Securities and Exchange Commission filed charges against Archer-Daniels-Midland Company (ADM) and three of its former executives for accounting and disclosure fraud.
The SEC said the company, and former executives Vince Macciocchi and Ray Young, and a litigated action against its former executive Vikram Luthar, inflated the performance of a key ADM business segment, Nutrition, which the company then told investors was a driver of the company’s overall growth.
In the commission’s complaint against Luthar, the SEC further alleged that the executive directed “adjustments” to Nutrition’s transactions with other ADM business segments in 2021 and 2022 when the segment was not reaching its profit targets. The adjustments allegedly included retroactive rebates and price changes not customarily available to AND’s third-party customers that the SEC said were one-sided transfers of operating profits to Nutrition. The goal, the SEC alleges, was to make it appear that Nutrition was meeting the 15 to 20 percent per year operating growth executives were projecting to investors.
“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,” Judge Margaret A. Ryan, Director of the SEC’s Division of Enforcement, said. “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. In this matter, we credit ADM’s cooperation and its efforts to avoid future accounting and disclosure violations.”
The SEC’s settled order against ADM, Macciocchi, and Young found that Macciocchi and Luthar led the efforts to identify and structure the adjustments, and that Young negligently approved adjustments in 2019 and 2021.
The order creates a Fair Fund to distribute monetary relief to investors harmed by the violations. ADM agreed to pay $40 million in civil penalties, while Macciocchi agreed to pay disgorgement and prejudgment interest totaling $404,343 and a civil penalty of $125,000, and Young agreed to pay disgorgement and prejudgment interest totaling $575,610 and a civil penalty of $75,000. Macciocchi also agreed to a three-year officer and director bar.