The U.S. Justice Department has launched an investigation into the accounting practices of Archer Daniels Midland, according to reporting by Chris Prentice and Jody Godoy for Reuters. According to two people with direct knowledge of the matter, the probe has intensified pressure on the 122-year-old, Chicago-based company, known for its production of animal feed, sweeteners and other products.
The U.S. Attorney's Office for the Southern District of New York (SDNY) has recently interviewed former ADM employees, focusing on the company's pricing practices, particularly concerning sales from its commodities units to the Nutrition division. While a third source confirmed the opening of an investigation by the SDNY, the specific details and scope of the probe remain unclear.
ADM and the SDNY have declined to comment on the matter. It is important to note that government investigations are not definitive proof of wrongdoing and do not always lead to charges. However, the involvement of the Justice Department, capable of imposing criminal charges and substantial fines, has raised concerns among investors and further impacted ADM's share prices, which fell an additional 4.3% to $53.29. The company has informed employees of a delay in bonuses for some senior executives until its financial statements are completed and audited.
The company's internal investigation focuses on "intersegment transactions" in its Nutrition reporting segment. The Nutrition division, though a smaller unit within ADM's vast global grains trading business, has recently gained significance in executive compensation. In 2020, a change by ADM's Compensation and Succession Committee tied half of long-term executive compensation to the operating profit growth of the Nutrition segment.