ConAgra Foods Inc. will pay a $45 million civil fine as part of a settlement with federal regulators who accused the company of using improper accounting to help it meet Wall Street expectations, a company spokeswoman said Wednesday.
The Securities and Exchange Commission filed a civil complaint in U.S. District Court in Denver on Tuesday, accusing ConAgra of “improper, and in certain instances fraudulent” accounting in fiscal 1999 through 2001.
As a result, the SEC alleged, ConAgra misreported profits between the first quarter of fiscal 1999 and the third quarter of fiscal 2001.
The packaged-food company did not admit or deny the SEC charges as part of the settlement.
It also doesn’t expect the settlement to affect its earnings because ConAgra has already recorded charges totaling $47.7 million in anticipation of settling with the SEC, ConAgra spokeswoman Stephanie Childs said.
“The SEC filing yesterday marks the end of the case,” Childs said, “and we’re pleased to have resolved this issue with the SEC.”
The company first disclosed the investigation in September 2001.
ConAgra shares fell 5 cents to $26.21 in midday trading Wednesday.
Childs said ConAgra set aside $25 million in fiscal 2004, $21.5 million in fiscal 2005 and $1.2 million during the first quarter of fiscal 2007 to cover costs related to the case.
The SEC said in a statement that ConAgra’s $45 million fine would be placed in a fund to be distributed to harmed investors.
“The facts here are particularly troubling because of the number of different improprieties engaged in by ConAgra, the length of time over which they occurred, and the fact that senior management was involved in the misconduct,” said Linda Thomsen, director of the SEC’s enforcement division.
In addition to paying the company settlement, ConAgra paid $2.7 million in legal fees and reimbursements for four former executives who have been accused of helping with the accounting scheme that inflated earnings.
The civil allegations against those former ConAgra executives and against three former executives of the ConAgra subsidiary United Agri Products are similar to allegations the SEC made against ConAgra.
The SEC said Wednesday that it had already reached settlement agreements with six of those seven former executives. Litigation is pending against a former senior United Agri Products executive.
The complaint filed Tuesday accused ConAgra of improperly using some of its reserves as a “cookie jar” to make up for losses, improperly recognizing revenue on deferred delivery sales, and failure to record adequate bad debt expense at UAP.
The Omaha-based company sold United Agri Products in 2003.
The complaint alleged “numerous” income tax errors, understating of income tax expenses, and improper reductions of reserves.
That caused ConAgra to misstate reported income before income taxes by nearly $218.5 million and to misstate its reported income tax expense by $105 million, leading it to file false and misleading financial statements, the SEC alleged.
In 2005, ConAgra agreed to pay $14 million to settle a lawsuit over fictitious sales and misreported earnings at United Agri Products that inflated ConAgra’s earnings.