SEC says ADM shifted profits to boost Nutrition results; company to pay $40 million

Archer-Daniels-Midland Co.’s January 2024 stock collapse—when shares fell 24% in a single session after the company disclosed an internal accounting probe and placed its chief financial officer on leave—now has a clearer explanation from federal regulators.

SEC alleges profit shifting to meet growth narrative

On Jan. 27, the Securities and Exchange Commission filed settled charges against ADM and two former senior executives, and a separate civil enforcement action against a third, alleging the company misstated results in its Nutrition segment and misled investors about the pricing of transactions between its business units.

According to the SEC, ADM executives used retroactive “rebates” and price adjustments on internal sales to move tens of millions of dollars of operating profit into the Nutrition segment in 2019, 2021 and 2022, while telling shareholders the intersegment deals were conducted on terms “approximating market.”

“Transparent and honest disclosure are key to maintaining market integrity, so when ADM misled its investors, the SEC stepped in to protect them and the market,” said Margaret A. Ryan, director of the SEC’s Division of Enforcement.

$40 million penalty; two executives settle

ADM, based in Chicago, agreed to pay a $40 million civil penalty, which the SEC said would be distributed to harmed investors through a fair fund. The company settled without admitting or denying the agency’s findings and said it will continue cooperating.

Two former executives also resolved the SEC matter:

• Vince Macciocchi, who led the Nutrition segment from 2018 to 2023, agreed to disgorge $404,343 plus interest, pay a $125,000 civil penalty, and accept a three-year officer-and-director bar.
• Ray Young, ADM’s longtime former CFO, agreed to disgorge $575,610 plus interest and pay a $75,000 penalty.

Separate lawsuit targets former CFO Vikram Luthar

The SEC separately sued former ADM CFO Vikram Luthar in federal court in Chicago, accusing him of securities fraud, aiding and abetting ADM’s violations, and certifying financial reports he knew—or was reckless in not knowing—were misleading.

The complaint seeks civil penalties, a permanent officer-and-director bar, and repayment of certain bonuses and stock-sale profits under Section 304 of the Sarbanes-Oxley Act. Luthar has not publicly responded to the allegations and is expected to contest the case.

Why Nutrition mattered so much

The enforcement action centers on ADM’s decade-long push to transform itself from a lower-margin grain trader and ethanol producer into a higher-margin supplier of ingredients and specialty products. That strategy included multibillion-dollar investments in Nutrition, including a roughly $3 billion acquisition of a European natural flavors company.

By 2019, ADM’s message to investors was that Nutrition would drive most future profit growth, with executives repeatedly forecasting 15% to 20% annual operating-profit growth in the segment.

The SEC alleges that as hitting those targets became harder—due to commodity costs and shifting markets—executives used internal accounting adjustments to keep Nutrition on track rather than reset expectations.

How internal “rebates” allegedly moved profit

ADM reports results in three main segments: Nutrition; Ag Services and Oilseeds; and Carbohydrate Solutions (which includes ethanol and sweeteners). The segments buy and sell products to one another, and ADM historically told investors intersegment transactions were recorded at prices approximating those paid by outside customers.

The SEC said executives at times approved post hoc adjustments that lacked a contractual basis and did not reflect market terms, effectively shifting profit from Ag Services and Oilseeds or Carbohydrate Solutions into Nutrition.

The “white flake” example

One example cited by regulators involved “white flake,” a commodity input used in Nutrition products. A spike in white flake prices threatened Nutrition’s margins and a revised 20% growth target in 2021.

According to the SEC’s order, Luthar and Macciocchi devised a plan to retroactively reprice earlier white flake sales from Ag Services and Oilseeds to Nutrition, booking the difference as a rebate to Nutrition. The SEC found Young negligently approved the change.

Internal messages referenced by the SEC include a Nutrition executive describing the idea as a “$5M–$8M [operating profit] transfer” aimed at performance “to our investors.” In another exchange, Macciocchi raised concerns about calling the payment a “rebate,” warning it could look like Ag Services and Oilseeds was “giving us a gift.” Luthar suggested describing it as “risk sharing,” the SEC said.

The SEC said Nutrition ultimately received a $20.7 million rebate tied to white flake in 2021. Without it, the agency alleges, Nutrition’s operating profit would have grown about 17% that year rather than the 20% ADM reported.

Additional adjustments in 2022

Regulators said similar conduct occurred in 2022, when internal forecasts again projected Nutrition would miss its growth goals. The SEC alleges Luthar directed finance staff to find $10 million to $20 million in additional adjustments.

Among the cited changes: a retroactive $2.5 million rebate from Carbohydrate Solutions to Nutrition on fertilizer sales already recognized, along with further adjustments to white flake pricing. SEC-cited internal communications included messages that “nobody cares anymore about Q4 [overall ADM], but they will be watching Nutrition Q4 numbers” and that “we all need to help Nutrition deliver 15–20% OP growth.”

Incentives and investor impact

The SEC said ADM’s incentive plans heightened pressure: beginning in 2020, a larger share of senior leaders’ bonuses was tied specifically to Nutrition’s performance.

The agency also alleged Luthar received a $130,000 cash bonus in 2022 linked partly to Nutrition’s 2021 performance and sold more than $1.8 million in ADM stock in 2022 and 2023 at prices inflated by overstated Nutrition results.

ADM has emphasized that the accounting issues did not change previously reported consolidated net earnings, balance sheet totals, or cash flows, but instead involved segment reporting and the classification of intersegment sales. Regulators and investors, however, have argued the misstatements were significant because Nutrition had become central to ADM’s valuation and growth narrative.

DOJ probe closed; private litigation continues

ADM previously disclosed that the Department of Justice, including prosecutors in the Southern District of New York, had opened a criminal investigation and issued grand jury subpoenas. On Jan. 27, alongside the SEC settlement, ADM said the DOJ closed its probe without further action.

A securities class action in federal court in Chicago—on behalf of investors who bought ADM shares between April 30, 2020, and Jan. 22, 2024—alleges the company and executives overstated Nutrition’s profitability and failed to disclose internal adjustments. That case remains pending.

ADM has restated certain prior financial statements to correct segment reporting and intersegment classifications and later disclosed a material weakness in internal control over financial reporting related to segment disclosures. The company said it has implemented new controls and revised policies governing intersegment transactions.

In a statement following the settlement, ADM chair and CEO Juan Luciano said the company “is pleased to put these matters behind the Company,” adding that the actions taken “enhance our internal controls and ensure accuracy of our financial reporting.”

A broader warning on segment disclosures

For regulators, the case underscores a growing focus on the reliability of segment-level disclosures and internal pricing—not only headline earnings. For investors, it is a reminder that when valuations increasingly hinge on a company’s growth story, the lines inside the income statement can matter as much as the bottom line.