The company and law firm names shown above are generated automatically based on the text of the article. We are improving this feature as we continue to test and develop in beta. We welcome feedback, which you can provide using the feedback tab on the right of the page.
WASHINGTON, Sept 3 (Reuters) – The Kraft Heinz Company (KHC.O) and two former executives have agreed to pay more than $62 million to settle charges they falsified supplier contracts to achieve cost savings in a multi-year accounting scheme, the U.S. securities regulator said on Friday.
The food company engaged in an array of accounting misconduct from the last quarter of 2015 to the end of 2018 during which it improperly inflated key earnings for investors, the Securities and Exchange Commission (SEC) said on Friday.
The alleged misconduct began as a result of a “cost savings gap” leading up to Heinz’s 2015 merger with Kraft and continued for years amid pressure to make good on promises the new company would “deliver on certain cost savings,” according to SEC documents.
Kraft restated its financials in June 2019 after the launch of an SEC probe, correcting $208 million in improperly recognized cost savings from nearly 300 transactions, the regulator said.
Kraft, which did not admit or deny the SEC’s findings, said in a statement that it fully cooperated with the SEC’s investigation and has taken “remedial action and proactive steps” to boost its policies and controls for financial reporting.
The Chicago-based company agreed to pay a $62 million civil penalty and not commit future violations as part of its agreement with the SEC. Kraft recorded the penalty in the second quarter of 2021, the statement said.
Former chief operating officer Eduardo Pelleissone, who was accused of negligence-based anti-fraud and other controls violations, agreed to pay a penalty of $300,000 and another $14,000 in disgorgement.
Former chief procurement officer Klaus Hofmann agreed to pay $100,000 and was barred from serving as a public company officer or director for five years in a settlement that is pending court approval.
Neither executive admitted or denied the SEC’s findings. Lawyers for both did not respond immediately to requests for comment.
Reporting by Chris Prentice and Susan Heavey in Washington
Additional reporting by Jonathan Stempel in New York; editing by Emelia Sithole-Matarise and Steve Orlofsky