SEC Targets ADM & Former Executives Over Profit Adjustments That Inflated Nutrition Results

Key Takeaways

• Segment Performance Was Inflated Internally: The SEC found that ADM overstated the operating performance of its Nutrition segment through internal accounting adjustments that shifted profits from other business units when targets were missed.
• Adjustments Were Not Market-Based: The retroactive rebates and price changes used to boost Nutrition’s results were not available to third-party customers and conflicted with ADM’s disclosure that intersegment transactions approximated market pricing.
• Disclosure and Controls Failures Spanned Multiple Years: According to the SEC, the improper adjustments affected annual and quarterly filings across fiscal years 2019, 2021, and 2022, pointing to sustained weaknesses in internal accounting controls and financial reporting oversight.
• Executives Face Diverging Outcomes: While ADM and two former executives settled and agreed to penalties and remedial measures, the SEC is pursuing a litigated action against a former executive it alleges directed the misconduct, including seeking an officer and director bar.
• Cooperation Meaningfully Shaped the Resolution: The SEC explicitly credited ADM’s internal investigation, voluntary self-reporting, and control enhancements in accepting the settlement and setting penalties, reinforcing the enforcement value of early cooperation and remediation.

Deep Dive

For several years, Archer-Daniels-Midland’s Nutrition business sat at the center of the company’s growth story. Investors were told the segment was delivering consistent, double-digit operating profit growth and helping power the agribusiness giant’s broader expansion.

On Tuesday, the U.S. Securities and Exchange Commission said that narrative was propped up by accounting practices that distorted how the business was actually performing.

The SEC announced settled charges against Archer-Daniels-Midland Company and two former executives, alongside a litigated action against a third, alleging that the company materially inflated the results of its Nutrition segment through internal profit adjustments that masked shortfalls and misled investors.

According to the SEC, when Nutrition fell behind its operating profit targets, senior executives authorized retroactive rebates and price changes on transactions with other ADM business units. Those adjustments were not offered to third-party customers and, regulators say, effectively transferred operating profit into the Nutrition segment to make it appear that the business was meeting projected growth rates of 15% to 20% per year.

The SEC’s complaint alleges that former executive Vikram Luthar directed those adjustments during fiscal years 2021 and 2022, specifically when Nutrition’s performance came up short. The transactions, the agency says, were structured to hit precise dollar targets rather than reflect market-based pricing.

A separate SEC order resolving charges against ADM and two other former executives describes a broader pattern. The order finds that Luthar and Vince Macciocchi led efforts to identify and structure improper adjustments tied to Nutrition’s profit goals, while Ray Young negligently approved similar adjustments during earlier reporting periods, including fiscal years 2019 and 2021.

As a result, the SEC found that ADM overstated Nutrition’s operating profit across multiple years and quarters, rendering the company’s annual and quarterly disclosures false and misleading. The adjustments, regulators said, were inconsistent with ADM’s public representation that intersegment transactions were recorded at amounts “approximating market.”

The enforcement action highlights the SEC’s continued focus on internal accounting controls and segment-level disclosures, particularly where companies promote specific business units as drivers of growth. In this case, the agency said, the adjustments distorted not only Nutrition’s results but also the information investors relied on to assess ADM’s overall performance.

The SEC credited ADM for its cooperation and remediation in resolving the case. The company conducted an internal investigation, voluntarily reported its findings, and provided additional analysis from an outside accounting expert. ADM also implemented new accounting controls governing intersegment transactions, revised its policies and procedures, and tested the effectiveness of those controls.

As part of the settlement, ADM agreed to pay a $40 million civil penalty. The SEC also established a Fair Fund to distribute monetary relief to investors harmed by the misconduct.

“Transparent and honest disclosure are key to maintaining market integrity,” said Margaret A. Ryan, Director of the SEC’s Division of Enforcement, adding that the agency considers cooperation and remediation when determining enforcement outcomes.

Under the settlement, Macciocchi agreed to pay approximately $404,343 in disgorgement and prejudgment interest and a $125,000 civil penalty, and accepted a three-year officer and director bar. Young agreed to pay approximately $575,610 in disgorgement and prejudgment interest and a $75,000 civil penalty. ADM, Macciocchi, and Young consented to cease-and-desist orders without admitting or denying the SEC’s findings and agreed to cooperate with ongoing proceedings.

The case against Luthar remains pending. The SEC filed its complaint in the U.S. District Court for the Northern District of Illinois, alleging violations of antifraud provisions of federal securities laws, aiding and abetting ADM’s reporting and internal controls violations, and failing to reimburse certain executive compensation as required under the Sarbanes-Oxley Act. The agency is seeking injunctions, disgorgement with interest, civil penalties, an officer and director bar, and reimbursement of compensation.

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