The regulator stated on Tuesday that the Grain trader Archer-Daniels-Midland Company intends to pay a $40 million civil penalty after the U.S. Securities and Exchange Commission charged it and two of its former executives with exaggerating the performance of one of its business units.
Under the settlement, the U.S. Department of Justice concluded a related criminal investigation without filing any charges.
The resolution ends the decades of government inquiries into accounting questions at ADM that compelled the grain trader to recalculate its financial statements twice, which cost it shareholders and triggered lawsuits by shareholders. However, the settlement involves the charges against the former executives Vince Macciocchi and Ray Young.
An ADM lawyer failed to provide an immediate comment response, but in a statement on the company website, CEO Juan Ricardo Luciano stated that the company is glad to have the issue behind them and that the company is taking “extensive actions” to strengthen internal controls.
Young and Macciocchi attorneys also failed to respond promptly to comment requests. ADM shares had surged 0.34 percent in after-hours trading on Tuesday.
Reuters previously reported that the federal prosecutors began a probe in early 2024 into accounting problems at ADM tied to the performance of its highly touted “Nutrition” unit. Both the government investigations and an internal inquiry resulted in the departure of the former chief financial officer of ADM.
The probe involved internal company transactions that inaccurately cited financial outcomes for the “Nutrition” unit, which was established in 2018 to boost development of high-value specialty ingredients for the food, beverage, and animal feed industries.
Therefore, the news of the accounting irregularities broke in early 2024, resulting in ADM shares to perform worst and heaping pressure on senior executives, such as Luciano, as top executive compensation had been tied to growth in the Nutrition unit.
The inquiry into “intersegment” transactions between the business segments of the company was based on whether ADM had intentionally overstated the performance of Nutrition by selling its goods at prices lower than those of the other business segments of the company.
In a statement by the regulator, the SEC regarded the cooperation of ADM in accepting the settlement offer. The company performed its own internal investigation, voluntarily disclosed its results to the agency employees, and furnished them with further analyses by an independent audit professional.
The SEC reported that ADM’s remedial actions involved new internal accounting controls around intersegment transactions, revising its policies and procedures, and testing the effectiveness of new controls, among other things.
