The Securities and Exchange Commission (SEC) filed a complaint against The Kraft Heinz Company and two former company executives alleging various types of accounting misconduct.
Per the SEC’s order, from the last quarter of 2015 to the end of 2018, Kraft recognized unearned discounts from suppliers and maintained false and misleading supplier contracts — which resulted in improperly reducing the company’s cost of goods sold and allegedly achieved cost savings.
The SEC said the accounting improprieties resulted in Kraft reporting inflated adjusted EBITDA, which is an performance metric used by investors.
“Investors rely on public companies to be 100 percent truthful and accurate in their public statements, especially when it comes to their financials,”
SEC Division of Enforcement Director Gurbir S. Grewal said. “When they fall short in this regard, we will hold them accountable. No matter how complex and far-reaching the financial misconduct, we will vigorously pursue wrongdoers because that’s what investor protection requires.”
Kraft, which did not admit or deny the agency’s findings, consented to cease and desist from future violations and payment of a civil penalty of $62 million.
Additionally, according to the SEC, Kraft’s former Chief Operating Officer Eduardo Pelleissone consented to cease and desist from future violations, pay disgorgement and prejudgment interest of $14,211.31, and pay a civil penalty of $300,000. Also, without admitting or denying the agency’s allegations, Kraft’s former Chief Procurement Officer Klaus Hofmann consented to a final judgment permanently enjoining him from future violations, ordering payment of a civil penalty of $100,000 while barring him from serving as an officer or director of a public company for five years. Hofmann’s settlement is subject to court approval, according to the SEC.