WASHINGTON, D.C. (Reuters) — The U.S. justice department is probing the accounting practices at Archer Daniels Midland, according to two people with direct knowledge of the matter.
New York-listed shares of ADM’s stock dropped 24 percent late last month after the company disclosed it had suspended its chief financial officer amid an internal probe into accounting practices related to its Nutrition division.
The company’s probe was prompted by a Securities and Exchange Commission inquiry, it said.
The two sources said that in recent days the U.S. Attorney’s Office for the Southern District of New York interviewed former ADM employees about accounting practices at the 122-year old, Chicago-based maker of animal feed, sweeteners and other products.
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The sources each said a prosecutor asked about the company’s pricing practices related to the sales of goods from ADM’s commodities units to its Nutrition division.
A third source with knowledge of the matter said the attorney’s office had opened an investigation into ADM.
Reuters could not immediately determine the scope of the probe or the degree to which it had advanced. Spokespeople for ADM and the attorney’s office declined to comment.
Government investigations are not evidence of wrongdoing and do not necessarily result in charges.
Still, a probe by the justice department, which has the power to bring criminal charges and impose steep fines, increases pressure on ADM and is likely to inflame investor concerns.
Reuters could not determine whether the justice department probe directly relates to the company’s internal probe. That focuses on “intersegment transactions” in ADM’s Nutrition reporting segment and the transfer of goods between segments, according to ADM’s Jan. 21 disclosure, in which it also said it would delay its financial results.
The Nutrition division manufactures ingredients used in pet food, animal feed and consumer products, such as energy bars. It is a relatively small unit of ADM, a giant in global grains trading that has a market capitalization of nearly $30 billion.
Since 2020, however, the division has played a major role in doling out executive compensation.
A change by ADM’s Compensation and Succession Committee in 2020 tied half of long-term executive compensation to the Nutrition segment’s operating profit growth, according to ADM’s regulatory filings.
Previously, long-term compensation was based on ADM’s adjusted earnings, return on invested capital and relative total shareholder returns, the filings showed.
ADM’s 24 percent share price plunge was its biggest single-day reduction since 1929, according to the Chicago-based Center for Research in Security Prices.
The company has since told employees it will delay bonuses for some senior executives until its financial statements are completed and audited.
