Regulation

Ex-ConAgra Finance Execs Settle Accounting Charges

Among the SEC's allegations: income tax errors, improper use of purchase accounting reserves, and the use of a reserve account as a "cookie jar."
Stephen TaubJuly 2, 2007

Four former finance executives at ConAgra Foods have settled civil charges with the Securities and Exchange Commission that stemmed from allegedly improper accounting practices.

The four ex-officials of the packaged-food company include former CFO James O’Donnell, former corporate controllers Jay Bolding and Kenneth DiFonzo, and former vice president for taxes Debra Keith.

Harry Hill, the former director of corporate accounting, and Dwight Goslee, the former executive vice president of operations, were also hit with administrative bans and penalties.

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The enforcement actions sprung from charges against the former officials of improper accounting practices, inaccurate disclosure, and income-tax errors occurring between fiscal years 1999 and 2005. The action caused ConAgra to materially misstate its financial performance in its public statements and financials, according to the complaint.

The commission charged that in 1999, DiFonzo the former controller, improperly directed certain accounting practices linked to the setting up and using excess tax, interest, and purchase-accounting reserves, as well the use of a reserve account as a “cookie jar.”

After the end of the third quarter of fiscal 2000, Bolding, the other ex-controller, offset $6 million of unplanned-for and unreserved-for losses in a joint venture with a dollar-for-dollar reduction in an excess-reserve account, according to the complaint.

Near the end of the fourth quarter of fiscal 2000, Bolding cut excess legal and environmental reserves to offset more than $5.4 million in unexpected losses spawned by a ConAgra Frequent Flyer Miles promotion, according to the SEC. In the fourth quarter of that fiscal year, Bolding improperly slashed a fiscal year 1996 restructuring reserve by $24.4 million.

In fiscal 2004, Keith improperly calculated the stock basis following the sale by ConAgra of several beef/pork subsidiaries and, as a result, incorrectly determined that the sale had resulted in a capital loss for tax purposes, according to the complaint.

Hill, at the request of DiFonzo or Bolding, signed journal entries that improperly cut or allocated certain excess reserve accounts from fiscal year 1999 through fiscal year 2001, the SEC alleged.

Without admitting or denying the charges, O’Donnell, Bolding, and DiFonzo each consented to refrain from violating and aiding and abetting violations of a number of reporting, books and records, and internal controls provisions of the federal securities laws. Keith, without admitting or denying the commission’s allegations, consented to steer clear of most of violating most of these same provisions.

Further, O’Donnell agreed to pay more than $717,000, Bolding consented to pay over $600,000, DiFonzo agreed to pay $139,988 and to divest 20,192 unexercised ConAgra stock options.

Keith agreed to disgorge $132,456 and the monetary value of 2872 shares of ConAgra stock, to pay $19,225 in prejudgment interest, to divest 866 unexercised ConAgra stock options, and to pay a civil penalty of $60,000.

Bolding and DiFonzo also agreed to be suspended from appearing or practicing before the commission as accountants, with the right for reinstatement after one year.

In a separate civil action, Hill agreed to pay disgorgement of $10,463, plus $4,756 of prejudgment interest, and a $20,000 civil penalty, while Goslee agreed to pay a $45,000 civil penalty.