ConAgra Foods has agreed to pay a US$45m civil penalty following a lawsuit brought by US financial watchdog the Securities and Exchange Commission (SEC) alleging improper accounting.
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The US food giant has agreed to settle the case, which was officially filed with the US District Court in Denver yesterday (24 July), without admission or denial of culpability, an agreement that remains subject to ratification by the court.
The SEC claims that ConAgra participated in “improper, and in certain instances fraudulent” accounting from 1999 to 2001.
The complaint alleges that ConAgra improperly used some of its reserves to compensate for losses, improperly recognised revenue on deferred delivery sales, and failed to record adequate bad debt expense at its subsidiary United Agri Products (UAP).
In addition, the SEC alleges ConAgra was guilty of “numerous” income tax errors, understating of income tax expenses, and improper reductions of reserves. As a result, it misstated income before income taxes by nearly $218.5m and its reported income tax expense by $105m, leading it to file false and misleading financial statements.
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By GlobalDataConAgra said it was “pleased to have resolved this issue” and insisted the penalty would have “no impact” on profits for the current fiscal year.
The Nebraska-based group said: “The company has already recorded charges totalling $47.7m in anticipation of the expected settlement with the SEC, and this will have no impact on earnings for the current or future fiscal years. ConAgra Foods first disclosed this investigation in September 2001 and our settlement discussions with the SEC were disclosed in August 2004.”
Last month, the SEC filed related litigation against four former ConAgra executives, and in January brought similar complaints against three former executives at UAP.
