Mon, February 5, 2024
By Chris Prentice and Jody Godoy
WASHINGTON (Reuters) -The U.S. Justice Department is probing accounting practices at Archer Daniels Midland Co, according to two people with direct knowledge of the matter, ramping up pressure on the global commodities giant.
New York-listed shares of ADM's stock dropped 24% on Jan. 22 after the company disclosed the previous day that it had suspended its CFO amid an internal probe into accounting practices related to its Nutrition division. The company's probe was prompted by a Securities and Exchange Commission (SEC) inquiry, it said.
The two sources said that in recent days the U.S. Attorney's Office for the Southern District of New York (SDNY) has interviewed former ADM employees about accounting practices at the 122-year old, Chicago-based maker of animal feed, sweeteners and other products.
The sources each said a SDNY prosecutor asked about the company's pricing practices related to the sales of goods from ADM's commodities units to its Nutrition division.
A third source with knowledge of the matter said that the SDNY had opened an investigation into ADM. The source was unaware of the substance of the probe.
Reuters could not immediately determine the scope of the probe or the degree to which it had advanced.
Spokespeople for ADM and SDNY declined to comment.
Government investigations are not evidence of wrongdoing and do not necessarily result in charges.
Still, a probe by the Justice Department, which has the power to bring criminal charges and impose steep fines, increases pressure on ADM and is likely to inflame investor concerns.
Shares of ADM extended earlier losses on Monday, falling 4.3% to $53.29 at around 1:43 p.m. EST (1843 GMT).
Reuters could not ascertain if the Justice Department probe directly relates to the company's internal probe. That focuses on "intersegment transactions" in ADM's Nutrition reporting segment and the transfer of goods between segments, according to ADM's Jan. 21 disclosure in which it also said it was delaying its financial results.
The Nutrition division manufactures ingredients used in pet food, animal feed and consumer products, such as energy bars. It is a relatively small unit of ADM, a giant in global grains trading which has a market capitalization of nearly $30 billion. Since 2020, however, the division has played a major role in the doling out of executive compensation.
A change by ADM's Compensation and Succession Committee in 2020 tied half of long-term executive compensation to the Nutrition segment's operating profit growth, according to ADM's regulatory filings. Previously, long-term compensation had been based on ADM's adjusted earnings, return on invested capital and relative total shareholder returns, the filings showed.
ADM's 24% share price plunge was its biggest single-day fall since 1929, according to the Chicago-based Center for Research in Security Prices.
The company has since told employees that it will delay bonuses for some senior executives until its financial statements were completed and audited, Reuters reported last week.
(Reporting by Chris Prentice and Jody Godoy in New York
Editing by Michelle Price, Caroline Stauffer and Matthew Lewis)
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