Kraft Heinz will pay $62 million to settle SEC claims that it overstated cost savings, inflating profits and misleading investors
Kraft Heinzwill pay a $62 million penalty to resolve a SECinvestigation into its accounting.
- Regulators alleged the group overstated
cost savings, inflating profits and misleading investors.
- Kraft Heinz and two of its former executives settled without admitting to or denying the charges.
Kraft Heinz will pay a $62 million penalty after regulators charged it on Friday with violating federal anti-fraud and record-keeping requirements. Two of the food conglomerate's former executives have agreed to pay a combined civil penalty of $400,000 as well.
"Kraft and its former executives are charged with engaging in improper expense-management practices that spanned many years and involved numerous misleading transactions, millions in bogus cost savings, and a pervasive breakdown in accounting controls," the Securities and Exchange Commission said in a statement.
The company behind Kraft Macaroni and Cheese and Heinz ketchup - along with its former operating and procurement chiefs, Eduardo Pelleissone and Klaus Hofmann - didn't admit to or deny the charges, but agreed not to commit future violations, the SEC said.
Kraft Heinz didn't immediately respond to a request for comment from Insider. The company said in a regulatory filing that it fully cooperated with the SEC, it has improved its financial reporting, and the settlement concludes the investigation.
The SEC accused Kraft Heinz of overstating its cost savings, inflating its profits and misleading investors as to how cheaply it makes its products.
The food giant restated its financials after the SEC launched its investigation in 2019, reversing $208 million of supposed cost savings from nearly 300 transactions between late 2015 and the end of 2018.
The SEC alleged in its complaint that Kraft Heinz employees drafted contracts showing upcoming savings from suppliers were already realized, recorded upfront payments without disclosing the future orders they related to, and reported discounts without revealing they were tied to price hikes in the future,
The agency also alleged that the food conglomerate lacked sufficient internal accounting controls, accused Pelleissone and Hofmann of ignoring warnings signs, and attributed the alleged false accounting to excessive pressure to achieve unrealistic cost-savings targets.
Kraft Heinz counts
The claims against Kraft Heinz echo those against Wells Fargo, which paid a $3 billion fine after employees resorted to opening fake accounts to meet aggressive sales targets.
- Chip shortage hits new brands in tough Indian laptop market
- Petrol and diesel prices hiked again by 35 paise for fifth consecutive day across the country
- India vs Pakistan at ICC T20 World Cup: The ‘Men in Blue’ have a definite advantage in this one
- Tamil drama 'Koozhangal' is India's official entry for Oscars 2022
- ICICI Bank net profit rises 25% on lower provisions in September quarter