ADM to pay $40 million to settle SEC accounting fraud probe

Archer-Daniels-Midland agreed to pay $40 million to settle a two-year federal investigation into the crop giant’s accounting practices that rocked its share price and eroded faith in the company’s transparency.

The civil penalty levied by the U.S. Securities and Exchange Commission settles allegations that ADM and former executives engaged in accounting and disclosure fraud when they sought to boost the bottom line of ADM’s flailing nutrition business unit to meet the Chicago-based company’s targets.

ADM neither admitted nor denied the SEC’s allegations, which regulators detailed late Tuesday. The company also said the Department of Justice has closed its investigation without taking further action.

The settlement caps a turbulent period for ADM, during which it lost market share, twice revised its financial statements and dismissed its chief financial officer. Chief Executive Officer Juan Luciano also faced criticism as the company grappled with the fallout from the accounting issues.

“We are pleased to put these matters behind the company,” Luciano said in a statement Tuesday.

But while the settlement lifts a heavy weight from the company, it still faces lawsuits from shareholders who allege ADM misled investors.

“ADM will continue to vigorously defend against the shareholder lawsuits,” spokeswoman Jackie Anderson said in an email.

Meanwhile, the SEC on Tuesday also settled with two former executives, Vince Macciocchi and Ray Young, who agreed to pay more than $500,000 each in penalties and other fees as a result of the alleged acts.

The agency separately filed a lawsuit against the company’s former CFO, Vikram Luthar, accusing him of coordinating a series of adjustments that shifted operating profits from other ADM units to prop up the nutrition segment.

Junaid Zubairi, an attorney for Luthar, said the regulator’s case was “meritless.”

“The SEC unjustly seeks to hold Mr. Luthar accountable for longstanding business practices at ADM,” Zubairi said in a statement. “The transactions in question were transparent and were considered, approved and implemented in good faith at the company.”

ADM -- which has grain-processing plants in Eastern Iowa, including in Cedar Rapids -- stunned the market in January 2024 when it made an unusual Sunday night announcement that it suspended its CFO and had to delay its earnings call. The company said it was investigating accounting practices in its nutrition unit, a business that creates and manufactures products including veggie burgers and pet food that executives believed was the future of the storied crop trader.

The fallout from the scandal sidelined Luthar -- who agreed to resign in September 2024 -- and drew investigations from both the DOJ and the SEC.

ADM lost as much as $16 billion of market value as shareholder trust was eroded and the company restated and corrected its earnings. The shares touched an almost five-year low last April. They have since rebounded to regain all those losses.

The probe also cast a spotlight on the company’s decade-long push, largely under the leadership of Luciano, to lessen its dependence on agricultural commodities trading, a notoriously volatile business. It spent $3 billion to acquire Wild Flavors GmbH and another $1.8 billion to take over animal-feed maker Neovia, the company’s largest-ever deals.

ADM’s nutrition segment is one of the smallest of the company’s business units, but its performance had an outsize impact on executive bonuses in 2020 and 2021, Bloomberg News previously reported.

The unit’s operating profit growth targets were metrics in ADM’s 2020 and 2021 cash bonus and long-term incentive plans for all eligible ADM employees, including Luthar, Macciocchi and Young, the SEC said. The company’s executives propped up the segment’s performance by essentially shifting profits from other business units through a series of retroactive rebates and price changes, the regulator said.

ADM faced a separate scandal in the 1990s, when it was implicated in a price-fixing conspiracy later portrayed in the 2009 film “The Informant” starring Matt Damon. ADM pleaded guilty to the price-fixing charges in 1996.