US grocery wholesaler Fleming has settled fraud charges with the US Securities and Exchange Commission (SEC), but authorities said the investigation still continues.
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The SEC announced the settlement of enforcement proceedings against Fleming for securities fraud and other violations arising from material earnings overstatements during late 2001 and the first half of 2002. The SEC also announced the settlement of enforcement proceedings against three Fleming suppliers and their employees, and against former employees of two other Fleming suppliers, for causing some of Fleming’s violations.
To settle the charges, Fleming, the suppliers and the supplier employees each consented to SEC orders to refrain from such violations in future. The suppliers and supplier employees also agreed to pay civil penalties ranging from US$100,000 to $400,000 for the suppliers and from $25,000 to $75,000 for the supplier employees. The SEC said is not seeking civil penalties against Fleming, which recently emerged from bankruptcy protection. All parties settled without admitting or denying the SEC’s non-jurisdictional findings.
“Fleming’s repeated wrongdoing masked the reality of an increasingly earnings-challenged company and prevented investors from discovering just how poorly the business actually was performing,” said Harold Degenhardt, administrator of the SEC’s Fort Worth office.
“As our investigation continues, we will focus on others who may have culpability for Fleming’s misconduct,” he added.
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By GlobalDataAmong the suppliers and their employees implicated in the SEC’s investigation are US dairy company Dean Foods, which agreed to pay a civil penalty of $400,000, and senior executive John Robinson; and dairy product supplier Kemps, formerly known as Marigold Foods, and its CEO James Green and vice president of financial services Christopher Thorpe. Bruce Keith Jensen, a director of national accounts for US snack food company Frito Lay during the relevant periods, and John Adams, a region manager for Kraft Foods during the relevant periods, also agreed to pay civil penalties.
“Put simply, Fleming manufactured earnings to meet Wall Street expectations. But it takes two to tango. Without suppliers providing or agreeing to false transaction documents, Fleming could not have misled investors as it did. Our actions today reinforce the Commission’s commitment to impose liability on those third parties who help others mislead investors,” said Spencer Barasch, associate administrator of the SEC’s Fort Worth office.
