SEC Charges ADM and Former Executives With Accounting and Disclosure Fraud
The SEC has charged Archer-Daniels-Midland and three former executives over alleged accounting and disclosure fraud.
Regulators say internal profit adjustments misled investors about a key business segment’s performance.
ADM has agreed to pay a $40 million penalty as one former executive contests the charges in court.
(STL.News) The U.S. Securities and Exchange Commission has charged Archer-Daniels-Midland Company and three former senior executives with accounting and disclosure fraud, alleging that internal financial practices misled investors about the performance of one of the company’s most closely watched business units.
According to the SEC, the alleged misconduct centered on ADM’s Nutrition segment, which the company had repeatedly promoted to investors as a primary growth engine. Regulators say internal accounting adjustments were used to make the segment appear more profitable than it actually was during multiple reporting periods.
Allegations Focus on Internal Profit Shifting
The SEC alleges that, when the Nutrition segment fell short of internal profit targets, internal transactions with other ADM business units were adjusted retroactively. These adjustments allegedly included retroactive rebates and pricing changes that were not available to third-party customers.
Regulators claim the effect of these changes was to shift operating profit into the Nutrition segment, helping it appear to meet ambitious growth projections presented to investors. The SEC says this practice created a distorted picture of the segment’s true financial performance.
The agency further alleges that these accounting practices conflicted with ADM’s public disclosures, which stated that transactions between company segments were conducted at market-value amounts.
Executives Charged, One Case Contested
The SEC’s action names three former ADM executives. Two of them have agreed to settle the charges, while the third is contesting the allegations in federal court.
Former executive Vince Macciocchi agreed to settle, consenting to financial penalties and a multi-year prohibition from serving as an officer or director of a public company. Former chief financial officer Ray Young also agreed to settle, accepting financial penalties without admitting or denying the SEC’s findings.
Former executive Vikram Luthar, however, has not settled. The SEC has filed a civil lawsuit against him in federal court, alleging that he played a central role in directing the disputed accounting adjustments. That case will proceed through litigation.
ADM Agrees to $40 Million Penalty
Without admitting or denying the SEC’s findings, ADM agreed to pay a $40 million civil penalty to resolve the charges. The settlement also establishes a Fair Fund intended to distribute money to investors who may have been harmed by the alleged misconduct.
The SEC said the penalty reflects both the seriousness of the alleged violations and the company’s cooperation with regulators once the issues came to light.
Cooperation and Remediation Credited
In announcing the settlement, regulators said they considered ADM’s remedial actions, which included conducting an internal investigation, voluntarily providing information to the SEC, engaging outside accounting experts, and strengthening internal controls related to intersegment transactions.
The SEC emphasized that transparent financial reporting is essential for investor trust, particularly when companies highlight specific business segments as future growth drivers.
Broader Implications for Investors
The case underscores the heightened scrutiny regulators are placing on how large corporations report segment-level performance. Analysts and investors often rely heavily on these disclosures to evaluate corporate strategy, growth potential, and valuation.
By alleging that internal accounting practices masked underperformance, the SEC signaled that it will closely examine not only headline earnings but also the mechanics behind how companies allocate revenue and profit across divisions.
What Happens Next
While ADM and two former executives have resolved the matter through settlement, litigation against Luthar will continue. The outcome of that case could further clarify the SEC’s expectations around internal accounting practices and executive accountability.
For investors, the enforcement action serves as a reminder that growth narratives must be backed by transparent, market-based financial reporting—and that deviations can carry significant legal and financial consequences.
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