US snacks and soft drinks giant PepsiCo has said that two of its divisions have received notification from staff at the US Securities and Exchange Commission that the SEC is proposing to recommend bringing a civil action against the divisions.

The proposed action would allege that a non-executive employee at the company’s Pepsi-Cola soft drinks unit and another at its Frito-Lay snacks unit signed documents in early 2001 prepared by US retailer Kmart acknowledging payments in the amount of US$3.0m from Pepsi-Cola and $2.8m from Frito-Lay. Kmart allegedly used these documents to improperly record the timing of revenue from these businesses, PepsiCo said.

The company said both divisions are cooperating fully with the investigation, and submitting reasons why they do not believe an action should be recommended or brought.

“Based on an internal review, no officers of PepsiCo, Pepsi-Cola or Frito-Lay are involved. The matter does not involve any allegations regarding PepsiCo’s own accounting for its transactions with Kmart or PepsiCo’s financial statements,” PepsiCo added.