In a one-two punch this week, the Securities and Exchange Commission finally showed its cards with regard to the scandal around intersegment sales accounting practices that has hung over Archer-Daniels-Midland for two years. 

The SEC on Tuesday announced settled accounting and disclosure fraud charges against the Chicago-based grain trader giant and two former executives — including Ray Young, ADM’s CFO from 2010 to 2022. Separately, regulators also filed a lawsuit charging accounting fraud against ex-CFO Vikram Luthar, a holdout who served as ADM CFO from April 2022 to mid-2024. At the core of the case: the SEC alleges Luthar materially inflated the performance of the company’s key Nutrition business segment when it was falling short of operating profit targets in fiscal years 2021 and 2022.

As part of the settlement, ADM agreed to pay a $40 million civil fine without admitting or denying the SEC’s findings. It also announced the closure of the SEC and Department of Justice investigations into its intersegment sales, noting that it has implemented “significant changes to its financial leadership and financial controls.”  

Now that the ADM accounting matter has landed in the courts, a new and public chapter opens. Yesterday’s filings contained some clues as to how the arguments may play out, as well as what the SEC’s enforcement actions may look like in the second Trump administration. Here are five takeaways from this week’s ADM developments: 

1. Former and current executives might not be fully out of the woods. In a securities filing Tuesday, ADM said the DOJ had notified the company “that it is no longer a subject of its investigation.” That suggests the company has been cleared, but that “all individuals” involved might not yet be cleared and free of worries with regard to the DOJ investigation, according to Francine McKenna, an adjunct professor who teaches accounting at Montclair State University in Montclair, New Jersey. The DOJ did not immediately respond to a request for comment. 
2. SEC showed teeth by charging accounting fraud. Disclosure and accounting fraud charges are distinct from one another, with accounting fraud carrying more weight by asserting GAAP was violated. Meanwhile, disclosure fraud is something of a lesser charge, because it asserts simply that the mistake made was a company or executives failing to alert shareholders about what happened, according to McKenna. By charging they violated Exchange Act Section 10(b) and Rule 10b-5, she said that “they make it clear that it’s not appropriate what happened,” she said. 
3. The case’s survival into the Trump administration speaks volumes. The issue goes back to actions that occurred in 2021 and 2022, and could have been dropped by the more business-friendly Trump administration’s SEC. The fact that the SEC took the enforcement action speaks to the gravity of the case, she said. “This is something that was considered serious across both administrations,” she said. 
4. Cooperation matters. Since Trump was re-elected, the SEC has signaled that they would value cooperation by companies under their watch. The $40 million fine is relatively modest compared to some previous enforcement penalties, she said, noting that the level could be a reward for ADM’s cooperation, which the SEC noted in its release. Cooperation “counts a lot in particular in this administration,” McKenna said. “They’re trying to send a message to other companies that even if the facts look bad, you do the right thing at the company and we’ll be easier.”
5. ADM finance executives were not all on the same page. In September 2022 ADM’s controller initially rejected a retroactive “rebate” that was part of a plan to offset the Nutrition businesses operating shortfall, citing a “lack of contractual obligation,” according to the SEC suit. After discovering a $21 million inventory error, the controller told a colleague that Luthar was “pretty angry with me” and that she could not “take many more angry calls.” Despite her expressed concerns, the controller “reversed course and ultimately approved a retroactive adjustment structured as a $2.5 million ‘rebate’ from CarbSol to Nutrition,” according to the complaint.