Dive Brief:
- Archer-Daniels-Midland’s former CFO Vikram Luthar refuted accounting fraud allegations made by the Securities and Exchange Commission in a lawsuit filed against him in January, according to 61-page filing that answered the SEC’s charges one by one.
- Luthar denied the suit’s central allegations: that in his capacity as CFO of the company’s Nutrition business and, after his promotion, as CFO of the whole company, he “orchestrated and approved a series of improper, post hoc, adjustments to sales between ADM’s business segments” to manipulate the numbers and shift operating profit from other business segments to burnish the performance of the company’s nutrition segment.
- In addition, Luthar’s attorneys asserted that the SEC’s claims and any remedies they seek are barred, in whole or part, “because Luthar reasonably relied on the advice, opinions and work product of qualified accounting and audit professionals, both internal to ADM and independent third parties.”
Dive Insight:
The March 27 filing provides the first glimpse of the legal strategy that Luthar — the sole defendant — will likely take in the case, which was filed in federal court in the Northern District of Illinois Eastern Division.
The SEC filed its complaint in January, the same day it announced that the Chicago-based grain trading giant agreed to pay a $40 million civil penalty to settle charges that the company and two other former executives inflated the performance of one of its businesses. At that time ADM also said the Department of Justice had closed its investigation of ADM, marking the apparent end of years-long SEC and DOJ probes into its accounting processes.
In the suit, Luthar is alleged to have 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, by directing retroactive “adjustments” in the form of rebates to make it appear as if it was meeting its goals, according to a release at the time.
Generally accepted accounting principles that guide how companies treat intersegment sales, or sales of items between a single company’s different entities, in their financial reports are emerging as a key facet of the suit.
Luthar acknowledges in his answers that certain filings indicated that intersegment sales were recorded at “amounts approximating market.” Yet he denies that he directed a series of adjustments to intersegment transactions or that he misled investors into believing that transaction values were conducted by two unrelated parties at arm’s length.
Luthar’s attorneys did not contest the complaint’s jurisdiction or some minor elements of the story behind the charges laid out in the suit. But they refuted many points large and small, including denying the complaint’s assertion that he is 57 years old.
“Each numbered paragraph of this Answer constitutes Luthar’s answer to the same numbered paragraph of the Complaint,” the filing states. “Luthar denies each and every allegation in the Complaint, as well as those contained in all headings, subheadings, and charts, except as expressly admitted herein.”
