Kraft Heinz to pay $ 62 million to settle SEC claims it overstated cost savings, inflated profits and misled investors

Kraft Heinz has neither admitted nor denied the charges.
  • Kraft Heinz will pay a fine of $ 62 million to resolve an SEC investigation into its accounting.
  • Regulators alleged the group overestimated cost savings, inflated profits and misled investors.
  • Kraft Heinz and two of its former executives settled without admitting or denying the charges.
  • See more stories on the Insider business page.

Kraft Heinz will pay a fine of $ 62 million after regulators accused it on Friday of violating federal anti-fraud and record-keeping requirements. Two of the former executives of the food conglomerate also agreed to pay a combined civil fine of $ 400,000.

“Kraft and its former executives are accused of engaging in inappropriate expense management practices that have lasted for many years and have involved numerous deceptive transactions, millions of bogus savings and a widespread breakdown of accounting controls,” he said. the Securities and Exchange Commission said in a statement. .

The company behind Kraft Macaroni and Cheese and Heinz ketchup – along with its former operations and supply managers, Eduardo Pelleissone and Klaus Hofmann – has not admitted or denied the accusations, but has agreed not to commit any violations. futures, the SEC said.

Kraft Heinz did not immediately respond to a request for comment from Insider. The company said in a regulatory filing that it had fully cooperated with the SEC, improved its financial reporting, and the settlement ended the investigation.

The SEC accused Kraft Heinz of overestimating its cost savings, inflating profits and misleading investors about the profitability of its products.

The food giant restated its finances after the SEC launched its 2019 investigation, reversing $ 208 million in supposed cost savings on nearly 300 transactions between late 2015 and late 2018.

The SEC alleged in its complaint that Kraft Heinz employees wrote contracts showing that future supplier savings had already been realized, recorded upfront payments without disclosing future orders to which they pertained, and reported discounts without revealing what ‘they were linked to price increases in the future,

The agency also alleged that the food conglomerate lacked sufficient internal accounting controls, accused Pelleissone and Hofmann of ignoring warning signs, and attributed the alleged false accounting to excessive pressure to meet unrealistic savings targets.

Kraft Heinz counts Warren Buffett’s Berkshire Hathaway as one of its major shareholders with a 27% stake. Berkshire partnered with 3G, a Brazilian private equity firm, to buy Heinz in 2013 and helped fund the condiment giant’s $ 100 billion merger with Kraft in 2015.

The claims against Kraft Heinz echo those against Wells Fargo, which paid a $ 3 billion fine after employees resorted to opening fake accounts to meet lofty sales targets.

Buffett, a Wells Fargo shareholder for more than 30 years, has lambasted the bank’s management and virtually wiped out its stake in the past year.

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