Press Release: SEC Charges Conagra Foods, Inc. in Financial Fraud and Accounting Case
ConAgra Foods, Inc. engaged in widespread accounting fraud from 1999 to 2005 through misuse of reserves, premature revenue recognition at UAP, and erroneous tax accounting, resulting in $218.5M in misstated income and $105M in understated tax expenses, and settled with the SEC by paying a $45M penalty and agreeing to permanent injunctions and independent oversight without admitting guilt.
ConAgra Foods, Inc. was charged by the SEC with fraudulent and improper accounting practices from fiscal years 1999 to 2005, including the misuse of corporate reserves in 1999 that overstated earnings by 15%, premature revenue recognition at its subsidiary United Agri-Products (UAP) in 2000 that inflated operating profit by 35%, and $105 million in erroneous tax accounting that understated income tax expense. These actions caused nearly $218.5 million in misstated income before taxes between 1999 and 2001 and led to missed Wall Street earnings estimates for six of eleven quarters. To settle the charges, ConAgra agreed to pay a $45 million penalty for investor restitution, consent to a permanent injunction against securities law violations, and submit to an independent review of its accounting controls—all without admitting or denying the allegations.
ConAgra Foods, Inc. was charged by the SEC with a multi-year pattern of accounting fraud and financial misreporting spanning fiscal years 1999 to 2005, involving the improper use of corporate reserves to inflate earnings in 1999, premature revenue recognition at its subsidiary United Agri-Products (UAP) in 2000, and systematic tax accounting errors that understated income tax expense by $105 million. The misconduct resulted in nearly $218.5 million in misstated income before taxes between the first quarter of 1999 and the third quarter of 2001, overstated earnings per share by over 10 cents in 1999, and caused the company to miss Wall Street earnings estimates for six of eleven quarters during that period. ConAgra restated its financial statements for all affected years (1999–2005) and agreed to pay a $45 million penalty, which the SEC intends to distribute to harmed investors via a Fair Fund. Without admitting or denying the allegations, ConAgra consented to a permanent injunction prohibiting violations of antifraud, reporting, books and records, and internal controls provisions of federal securities laws, and agreed to an independent consultant review of its reserve accounting and compliance functions. The SEC had previously settled civil and administrative actions against six former executives, including the CFO, two corporate controllers, and two UAP senior executives, while litigation against a seventh UAP executive remained pending. The case underscored the SEC’s commitment to holding corporations and individuals accountable for systemic financial manipulation that distorted investor perceptions and market integrity.
Extracted insights
- $218.50M $218.5 million $100M–$1B
- $105.00M $105 million $100M–$1B
- $45.00M $45 Million $10M–$100M
- $45.00M $45 million $10M–$100M
- agency associate director of sec division of enforcement
- person christopher conte
- company conagra foods, inc.
- agency director of sec division of enforcement
- person linda thomsen
- agency Securities and Exchange Commission
- SEC charged Conagra Foods, Inc.
- Conagra Foods, Inc. agreed to pay $45 Million Penalty
- Conagra Foods, Inc. engaged in Improper and Fraudulent Accounting Practices (Fiscal Years 1999-2001)
- Conagra Foods, Inc. misused Corporate Reserves to Manipulate Reported Earnings (Fiscal Year 1999)
- United Agri-Products (UAP) engaged in Improper and Premature Revenue Recognition Scheme (2000)
- Conagra Foods, Inc. overstated Annual Reported Income by 15% (1999)
- Conagra Foods, Inc. overstated Earnings Per Share by More Than 10 Cents (1999)
- Conagra Foods, Inc. misstated Reported Income Before Income Taxes by $218.5 Million (Q1 1999-Q3 2001)
- United Agri-Products (UAP) overstated Agricultural Products Segment Operating Profit by 35% (Fiscal Year 2000)
- Conagra Foods, Inc. misstated Reported Income Tax Expense by $105 Million (Fiscal Years 2002-2005)
- Conagra Foods, Inc. restated Financial Statements (Years 1999-2005)
- Linda Thomsen is Director of SEC Division of Enforcement
- Christopher Conte is Associate Director of SEC Division of Enforcement
- SEC brought settled actions against Six Former Conagra Executives
- Conagra Foods, Inc. is headquartered in Omaha, Nebraska
SEC Charges Conagra Foods, Inc. in Financial Fraud and Accounting Case ConAgra Agrees to Pay $45 Million Penalty to Settle Charges FOR IMMEDIATE RELEASE 2007-142 Washington, D.C., July 25, 2007 - The Securities and Exchange Commission yesterday filed civil charges against ConAgra Foods, Inc., alleging that it engaged in improper, and in certain instances fraudulent, accounting practices during its fiscal years 1999 through 2001, including the misuse of corporate reserves to manipulate reported earnings in fiscal year 1999 and a scheme at its former subsidiary, United Agri-Products (UAP), in 2000 that involved, among other things, improper and premature revenue recognition. ConAgra is a diversified international food company headquartered in Omaha, Neb. Linda Thomsen, Director of the Commission's Division of Enforcement, said, "This case again illustrates that the Commission will take strong action when a company and its officers engage in accounting fraud that distorts the company's true financial condition. The facts here are particularly troubling because of the number of different improprieties engaged in by Con Agra, the length of time over which they occurred, and the fact that senior management was involved in the misconduct." Christopher Conte, Associate Director of the Commission's Division of Enforcement, said, "We will expose and address practices that undermine the integrity of financial reporting no matter what form they take - from the misuse of reserves to improper revenue recognition." In addition, the Commission alleges that during fiscal years 2002-2005, ConAgra's corporate tax department made numerous tax errors, causing the company to improperly account for tax benefits and understate its income tax expense. ConAgra has restated its financial statements for the years 1999 through 2005. According to the Commission's complaint, without engaging in the improper and at times fraudulent accounting practices, ConAgra would have missed the Wall Street analysts' consensus estimates of the company's earnings per share for at least six of eleven fiscal quarters in fiscal years 1999, 2000 and 2001. ConAgra's reserves misconduct in 1999 caused it to overstate annual reported income by 15% and to overstate earnings per share by more than 10 cents per share. Between the first quarter of fiscal year 1999 and the third quarter of fiscal year 2001 ConAgra misstated its reported income before income taxes by nearly $218.5 million. In fiscal year 2000 the UAP misconduct caused ConAgra to overstate its agricultural products segment's operating profit by approximately 35% and ConAgra's reported income before income taxes by 7.85%. As a result of the income tax errors, ConAgra misstated its reported income tax expense by $105 million. To settle the charges, ConAgra has agreed to pay a $45 million penalty, which the SEC will seek to place into a Fair Fund for distribution to harmed investors. Without admitting or denying the allegations in the complaint, ConAgra agreed to be permanently enjoined from violating the antifraud, reporting, books and records and internal controls provisions of the federal securities laws. ConAgra also has consented to a review by an independent consultant of its policies and procedures and financial and accounting compliance functions with respect to certain reserve accounts. The settlement is subject to court approval. Earlier this year, the Commission previously brought settled civil injunctive actions and settled administrative proceedings against six former ConAgra executives, including two former corporate controllers, its former chief financial officer, its former vice president of operations and control, and against two senior executives at UAP. Litigation is currently pending against a third UAP senior executive. # # # For more information, contact Linda Thomsen Director (202) 551-4500 Division of Enforcement Securities and Exchange Commission Antonia Chion Associate Director (202) 551-4842 Division of Enforcement Securities and Exchange Commission Christopher R. Conte Associate Director (202) 551-4834 Division of Enforcement Securities and Exchange Commission Daniel Chaudoin Assistant Director (202) 551-4952 Division of Enforcement Securities and Exchange Commission Additional materials: Litigation Release No. 20206 http://www.sec.gov/news/press/2007/2007-142.htm Home | Previous Page Modified: 07/25/2007
SEC Charges Conagra Foods, Inc. in Financial Fraud and Accounting Case ConAgra Agrees to Pay $45 Million Penalty to Settle Charges FOR IMMEDIATE RELEASE 2007-142 Washington, D.C., July 25, 2007 - The Securities and Exchange Commission yesterday filed civil charges against ConAgra Foods, Inc., alleging that it engaged in improper, and in certain instances fraudulent, accounting practices during its fiscal years 1999 through 2001, including the misuse of corporate reserves to manipulate reported earnings in fiscal year 1999 and a scheme at its former subsidiary, United Agri-Products (UAP), in 2000 that involved, among other things, improper and premature revenue recognition. ConAgra is a diversified international food company headquartered in Omaha, Neb. Linda Thomsen, Director of the Commission's Division of Enforcement, said, "This case again illustrates that the Commission will take strong action when a company and its officers engage in accounting fraud that distorts the company's true financial condition. The facts here are particularly troubling because of the number of different improprieties engaged in by Con Agra, the length of time over which they occurred, and the fact that senior management was involved in the misconduct." Christopher Conte, Associate Director of the Commission's Division of Enforcement, said, "We will expose and address practices that undermine the integrity of financial reporting no matter what form they take - from the misuse of reserves to improper revenue recognition." In addition, the Commission alleges that during fiscal years 2002-2005, ConAgra's corporate tax department made numerous tax errors, causing the company to improperly account for tax benefits and understate its income tax expense. ConAgra has restated its financial statements for the years 1999 through 2005. According to the Commission's complaint, without engaging in the improper and at times fraudulent accounting practices, ConAgra would have missed the Wall Street analysts' consensus estimates of the company's earnings per share for at least six of eleven fiscal quarters in fiscal years 1999, 2000 and 2001. ConAgra's reserves misconduct in 1999 caused it to overstate annual reported income by 15% and to overstate earnings per share by more than 10 cents per share. Between the first quarter of fiscal year 1999 and the third quarter of fiscal year 2001 ConAgra misstated its reported income before income taxes by nearly $218.5 million. In fiscal year 2000 the UAP misconduct caused ConAgra to overstate its agricultural products segment's operating profit by approximately 35% and ConAgra's reported income before income taxes by 7.85%. As a result of the income tax errors, ConAgra misstated its reported income tax expense by $105 million. To settle the charges, ConAgra has agreed to pay a $45 million penalty, which the SEC will seek to place into a Fair Fund for distribution to harmed investors. Without admitting or denying the allegations in the complaint, ConAgra agreed to be permanently enjoined from violating the antifraud, reporting, books and records and internal controls provisions of the federal securities laws. ConAgra also has consented to a review by an independent consultant of its policies and procedures and financial and accounting compliance functions with respect to certain reserve accounts. The settlement is subject to court approval. Earlier this year, the Commission previously brought settled civil injunctive actions and settled administrative proceedings against six former ConAgra executives, including two former corporate controllers, its former chief financial officer, its former vice president of operations and control, and against two senior executives at UAP. Litigation is currently pending against a third UAP senior executive. # # # For more information, contact Linda Thomsen Director (202) 551-4500 Division of Enforcement Securities and Exchange Commission Antonia Chion Associate Director (202) 551-4842 Division of Enforcement Securities and Exchange Commission Christopher R. Conte Associate Director (202) 551-4834 Division of Enforcement Securities and Exchange Commission Daniel Chaudoin Assistant Director (202) 551-4952 Division of Enforcement Securities and Exchange Commission Additional materials: Litigation Release No. 20206 http://www.sec.gov/news/press/2007/2007-142.htm Home | Previous Page Modified: 07/25/2007