Dive Brief:

• The Securities and Exchange Commission filed a lawsuit Tuesday against Archer-Daniels-Midland’s former CFO Vikram Luthar, alleging he 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. Luthar did so by directing retroactive “adjustments” in the form of rebates to make it appear as if it was meeting its goals, according to a release. 
• “In short, when financial circumstances made it difficult for Nutrition to meet its growth target, Luthar used ADM’s other business segments as Nutrition’s piggybank to close the shortfall, and misled investors into believing Nutrition’s growth was solely the result of normal operations and market factors,” according to the SEC’s complaint filed in U.S. District Court in the Northern District of Illinois Eastern Division.  
• Luthar’s attorney, Junaid Zubairi, called the SEC’s allegations against Luthar “meritless” and asserted that the SEC is “unjustly” seeking to hold Luthar accountable for long-standing business practices at ADM. “The transactions in question were transparent and were considered, approved, and implemented in good faith at the company,” Zubairi wrote in the statement emailed to CFO Dive, noting that Luthar was not interested in a settlement with the SEC. “He looks forward to establishing in court what has always been true — that he conducted himself with integrity and professionalism during his 20-year career at ADM.” 

Dive Insight:

The suit landed on the same day that the SEC 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. ADM also said in a release Tuesday that the Department of Justice had closed its investigation of ADM with no further action, marking the end of years-long SEC and DOJ probes into its accounting processes. 

The settlement, along with the company’s efforts to improve and remediate its reporting processes, pave the way for ADM to move out from under the accounting cloud, according to Seth Goldstein, a Morningstar analyst. “To me, once you’re in the phase of settling with regulators that means the light’s at the end of the tunnel and you’re ready to move forward,” Goldstein said in an interview.

The SEC found that ADM, along with Vince Macciocchi, who was president of the company’s Nutrition segment from March 2018 through December 2023, and Ray Young, who was ADM’s CFO from November 2010 through early April 2022, violated the antifraud, reporting, internal accounting controls, and books and records provisions of the federal securities laws, and that Macciocchi and Young caused certain of ADM’s violations, according to the SEC order Tuesday.

Without admitting or denying the findings, ADM, Macciocchi, and Young agreed to “cease and desist from committing or causing any violations and any future violations” of the relevant provisions of the federal securities laws. ADM has also voluntarily undertaken to cooperate fully with the SEC in the litigation and any other proceedings related to the matters described in the order.

Macciocchi agreed to pay disgorgement and prejudgment interest totaling $404,343 and a civil penalty of $125,000 and agreed to a three-year officer and director bar. Young agreed to pay disgorgement and prejudgment interest totaling $575,610 and a civil penalty of $75,000. 

Separately, as part of the relief requested in the lawsuit, the SEC is asking the court to require Luthar to reimburse ADM for any bonus or other incentive or equity-based compensation he received in the 12-month period after ADM’s filing of its fiscal year 2022 10-K. The complaint asserts that it was “widely understood by ADM executives and employees” that they should help Nutrition meet its goals and that ADM offered monetary incentives to executives based on Nutrition’s performance. 

The lawsuit comes roughly two years after ADM’s shares plunged following its announcement it was placing Luthar on administrative leave pending a probe into the company’s accounting practices and processes around intersegment transactions. That April, the company announced Luthar would resign in September of 2024. Former 3M CFO Monish Patolawala took ADM’s finance reins in August of 2024.

“We are pleased to put these matters behind the Company. These past couple of years have underscored what’s core to ADM — incorporating learnings to further strengthen our business,” Juan Luciano, ADM’s CEO, said in a statement in the company’s Tuesday release. “This is reflected in the extensive actions we have taken to enhance our internal controls and ensure accuracy of our financial reporting. Looking ahead, we remain committed to operating with transparency and integrity and upholding the trust of our stakeholders every day.”