Grain trader Archer-Daniels-Midland (ADM) has reported that it slightly altered its financial results between 2018 and 2023 and that a number of its employees have been subpoenaed by the US Department of Justice (DOJ), which is investigating the firm. ADM said the subpoenas followed a document request by the SEC.
The DOJ probe into ADM’s accounting standards is also reportedly progressing at a rapid pace, after Reuters reported FBI agents delivered those subpoenas in Illinois last week.
Reporting irregularities and remediation
The irregularities cited in the subpoenas, according to reports, relate to the prices that Archer-Daniels-Midland’s divisions charged each other for some products that did not reflect “market value”. As a result, the firm has corrected “certain segment-specific financial information” for the years between 2018 and 2023.
The company delayed its earnings report by nearly two months in response to a criminal probe over its financial reporting for the nutrition segment.
The company’s internal investigation found and corrected certain sales that were not recorded at “amounts approximating market value,” according to a statement from ADM. The commodities trader is implementing a remediation plan to ensure strong internal controls over its financial reporting, and it is changing its financial reporting standards to make its results more accurate.
The company also plans to enhance its merger and acquisitions integration approach, according to an investor presentation. The company has suspended its Chief Financial Officer, placing the executive on “immediate administrative leave”.
“We remain committed to strong internal controls,” Chairman and CEO Juan Luciano said in the statement. “We look to continue our focus on execution and remain steadfast in delivering on our purpose of unlocking the power of nature to enrich the quality of life.”
The subpoenas
Grand jury subpoenas order the recipient to produce documents or testify before a grand jury.
In this case, the subpoenas seek information and communications, as well as devices containing those communications, relating to certain ADM accounting information, including details on goods and cash transferred between company segments, according to the three sources that spoke to Reuters. Authorities were also seeking information on below-cost sales from the Carbohydrate Solutions and Agricultural Services & Oilseeds units to the nutrition division, one of them said.
The subpoenas came from the US Attorney’s Office in Manhattan, and in addition to the documents and devices, require the recipients to report to a New York courthouse in coming weeks, the three people said.
ADM share prices
ADM buys crops and sells them to food companies, governments and other buyers globally, while also running processing plants that turn oilseeds and grain into vegetable oil, fuel, livestock feed and other products.
ADM reported a $137m goodwill impairment charge in its animal nutrition unit and is facing a series of investor lawsuits over the investigation. Two of ADM’s credit ratings have been placed on watch by the SEC. .
The DOJ’s probe, with the potential for criminal charges and steep fines, increases pressure on ADM and will likely continue to weigh on its share price, as will litigation threats. Shares of ADM closed up 3.9% as of Monday, but the stock is down about 25% over the past 12 months.
It must be noted, of course, that government investigations are not evidence of wrongdoing and do not necessarily end in charges being brought.
The investigation at ADM follows a similar internal one announced by the chemical company Chemours last week. Chemours announced that a few of its top executives had shifted cash flows at year-end to hit targets that determined their annual stock and bonus award and that it has placed its CEO, CFO and chief accounting officer on administrative leave.
