DOJ Launches Probe Into ADM Over Its Accounting Practices (2)

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The US Attorney’s Office in Manhattan has launched an investigation into the accounting practices at <-bsp-bb-link state=””bbHref”:”bbg://securities/ADM%20US%20Equity/FA”,”_id”:”0000018d-7ae5-d52b-a3af-fbf7552b0000″,”_type”:”0000016b-944a-dc2b-ab6b-d57ba1cc0000″”>Archer-Daniels-Midland Co.-bsp-bb-link>, according to people with direct knowledge of the matter.

The probe is focused on the company’s nutrition business, said the people, who asked not to be named discussing confidential information. Shares of the crop trader fell as much as 4.8% in New York trading.

It’s the latest in the saga stemming from the nutrition unit.

ADM shook the commodity world last month after it suspended Chief Financial Officer <-bsp-person state=””_id”:”0000018d-7ae5-d52b-a3af-fbf7552c0000″,”_type”:”00000160-6f41-dae1-adf0-6ff519590003″”>Vikram Luthar-bsp-person> and cut its earnings outlook pending an outside counsel <-bsp-bb-link state=””bbDocId”:”S7MT40MEWG74″,”_id”:”0000018d-7ae5-d52b-a3af-fbf7552c0001″,”_type”:”0000016b-944a-dc2b-ab6b-d57ba1cc0000″”>inquiry-bsp-bb-link> into its accounting practices involving the troubled segment. The stock has slumped about 20% since the suspension was announced.

The company probe was prompted by a US Securities and Exchange Commission request. Now, the DOJ investigation raises the specter of potential legal consequences for ADM’s reporting procedures, boosting concerns about the full impact of what has occurred internally.

An ADM spokesman declined to comment on the DOJ investigation. The DOJ declined to comment.

Read More: <-bsp-bb-link state=””bbDocId”:”S7RYD0DWLU68″,”_id”:”0000018d-7ae5-d52b-a3af-fbf7552e0001″,”_type”:”0000016b-944a-dc2b-ab6b-d57ba1cc0000″”>ADM Unit Being Probed Helped Make Leaders Over $70 Million-bsp-bb-link>

The scandal has thrown the spotlight on a decade-long push, largely under the leadership of Chief Executive Officer <-bsp-person state=””_id”:”0000018d-7ae5-d52b-a3af-fbf755300000″,”_type”:”00000160-6f41-dae1-adf0-6ff519590003″”>Juan Luciano-bsp-person>, to lessen ADM’s dependence on its legacy agricultural commodities trading business, which is notoriously prone to volatility.

Nutrition was Luciano’s bet for future growth. ADM expanded the business with its $3 billion purchase of European natural ingredient maker Wild Flavors a decade ago, its biggest-ever acquisition. But profits have so far failed to live up to initial expectations due to weak demand, including for plant-based food.

While nutrition is still a small part of ADM’s business, it played an <-bsp-bb-link state=””bbDocId”:”S7RYD0DWLU68″,”_id”:”0000018d-7ae5-d52b-a3af-fbf755300001″,”_type”:”0000016b-944a-dc2b-ab6b-d57ba1cc0000″”>outsized-bsp-bb-link> role on recent executive bonuses.

The current drama has also aggravated investors’ long-time concerns that large, complex companies are more prone to the risk of undetected manipulation of crucial financial figures.

Read More: <-bsp-bb-link state=””bbDocId”:”S7QO6JT1UM0W”,”_id”:”0000018d-7ae5-d52b-a3af-fbf755310000″,”_type”:”0000016b-944a-dc2b-ab6b-d57ba1cc0000″”>ADM Accounting Probe Centers on Dubious Footnote Investors Watch-bsp-bb-link>

In a <-bsp-bb-link state=””bbDocId”:”S7W3WVT0G1KW”,”_id”:”0000018d-7ae5-d52b-a3af-fbf755310001″,”_type”:”0000016b-944a-dc2b-ab6b-d57ba1cc0000″”>memo-bsp-bb-link> late last month, Luciano said the company probe involves the “transfer of goods and the related financial accounting between business segments” and that the transactions under investigation wouldn’t significantly impact the crop trader’s earnings. Still, ADM has lost nearly $8 billion in market value since the probe became public.

ADM has delayed the reporting of its 2023 results.

(Updates with context starting in third paragraph)

–With assistance from Gerson Freitas Jr..

To contact the reporters on this story:
<-bsp-person state=””_id”:”0000018d-7ae5-d52b-a3af-fbf755390000″,”_type”:”00000160-6f41-dae1-adf0-6ff519590003″”>Tarso Veloso-bsp-person> in Chicago at tveloso3@bloomberg.net;
<-bsp-person state=””_id”:”0000018d-7ae5-d52b-a3af-fbf755390001″,”_type”:”00000160-6f41-dae1-adf0-6ff519590003″”>Isis Almeida-bsp-person> in Chicago at ialmeida3@bloomberg.net;
<-bsp-person state=””_id”:”0000018d-7ae5-d52b-a3af-fbf755390002″,”_type”:”00000160-6f41-dae1-adf0-6ff519590003″”>Ava Benny-Morrison-bsp-person> in New York at abennymorris@bloomberg.net

To contact the editors responsible for this story:
<-bsp-person state=””_id”:”0000018d-7ae5-d52b-a3af-fbf7553b0000″,”_type”:”00000160-6f41-dae1-adf0-6ff519590003″”>Angela Moon-bsp-person> at hmoon43@bloomberg.net

Peter Jeffrey, Millie Munshi

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