Risk & Compliance

Monsanto Settles Accounting Violations for $80M

The SEC faults the company for booking millions of dollars in revenue from a rebate program while failing to recognize costs at the same time.
Matthew HellerFebruary 10, 2016

Monsanto has agreed to pay $80 million to settle charges that it delayed recording costs associated with rebate programs for its flagship Roundup product, resulting in material misstatements of its earnings during a three-year period.

The U.S. Securities and Exchange Commission said the agribusiness giant booked substantial amounts of revenue from sales incentivized by the rebate programs, but violated accounting rules by failing to recognize all of the related program costs at the same time.

The SEC’s investigation found no personal misconduct by Monsanto CEO Hugh Grant and former CFO Carl Casale, but in an unusual move they agreed to reimburse the company $3,165,852 and $728,843, respectively, for cash bonuses and stock awards they received during the period when it committed the violations.

“It is the first time in memory that senior executives voluntarily agreed to return their bonuses in such a case,” the Washington Post said.

Two Monsanto accounting executives, Sara Brunnquell and Anthony Hartke, will pay $55,000 and $30,000, respectively, to settle the charges against them. A former sales executive, Jonathan Nienas, was fined $50,000.

“Monsanto devised rebate programs that elevated form over substance, which led to the booking of substantial amounts of revenue without the recognition of associated costs,” Scott W. Friestad, associate director in the SEC’s Division of Enforcement, said in a news release. “Public companies need to have robust systems in place to ensure that all of their transactions are recognized in the correct reporting period.”

Monsanto’s sales force began telling U.S. retailers in 2009 to use a new rebate program to incentivize Roundup sales in the fourth quarter of fiscal 2009. At the time, the company was facing increasing generic competition that threatened to cut into its profits.

Roughly one-third of U.S. sales of Roundup for 2009 occurred during the fourth quarter, the SEC said, but Monsanto improperly delayed recording costs related to the program until 2010. Other violations allegedly occurred in fiscal 2010 and 2011.

During the three-year period, “Monsanto improperly accounted for millions of dollars of rebates offered to Roundup distributors and retailers in the U.S. and Canada,” the SEC said in an administrative order.