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General Mills may face civil action by SEC

General Mills Inc. disclosed Tuesday that it may face civil charges in a Securities and Exchange Commission investigation into the company’s sales practices.
/ Source: Reuters

General Mills Inc. disclosed Tuesday that it may face civil charges in a Securities and Exchange Commission investigation into the company’s sales practices.

General Mills said the SEC had sent a “Wells notice,” a formal notice that the agency has made a preliminary decision to recommend civil action against the company. The notice also covers chief executive Steve Sanger and chief financial officer James Lawrence, the food giant said.

General Mills announced in October that the SEC had requested information about sales practices and related accounting. On Tuesday, the company said that inquiry is ongoing. It said the Wells notice “involves the company’s sales practices and disclosures related to those practices.”

Company spokesman Tom Forsythe declined to elaborate on the notice or SEC inquiry. But he reiterated that Golden Valley, Minn.-based General Mills believes its sales and related accounting practices comply with all applicable rules and regulations.

Food industry observers have said the SEC is probably investigating promotional fees General Mills paid retailers to ensure that products received good placement on store shelves.

“I don’t think it has a long-term impact on the company,” Crowell, Weedon & Co. analyst Doug Christopher said of the Wells notice. “It’s just part of the era, this market era of the last few years.” Tighter accounting rules “have basically hit every part of the market,” he said.

General Mills announced the notice after the market had closed. Shares closed up 17 cents at $45.65 on the New York Stock Exchange. They dropped 90 cents in the extended trading session.