The Kraft Heinz Company has agreed to pay a $62 million civil penalty to settle charges that it engaged in a long-running “expense management scheme,” the Securities and Exchange Commission announced.
The SEC said the scheme involved inflated cost savings that resulted in the restatement of several years of financial reporting. Also charged were Kraft’s former Chief Operating Officer Eduardo Pelleissone and its former Chief Procurement Officer Klaus Hofmann, for what the commission said was misconduct related to the scheme.
The SEC said that Kraft engaged in various types of accounting misconduct from 2015 to 2018, including maintaining false and misleading supplier contracts. The improper practices inflated the company’s key earnings performance for investors.
After the SEC began its investigation in June 2019, the commission said Kraft restated its financials, correcting $208 million in improperly recognized cost savings from nearly 300 transactions.
“The violations harmed investors who ultimately bore the costs and burdens of a restatement and delayed financial reporting,” said Anita B. Bandy, Associate Director of the SEC’s Division of Enforcement. “Kraft and its former executives are being held accountable for placing the pursuit of cost savings above compliance with the law.”
According to the SEC’s order, Kraft violated the negligence-based anti-fraud, reporting, books and records, and internal accounting controls provisions of the federal securities laws.
Kraft did not admit or deny the findings but did consent to the civil penalty and to cease and desist from future violations. Pelleissone settled for $300,000, while Hoffman will pay $100,000.
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