Risk & Compliance

SEC Sues Three Former ConAgra Execs

The misconduct caused the company to overstate its pre-tax income by more than 7 percent in fiscal 1999 and 2000.
Stephen TaubJanuary 17, 2007

The Securities and Exchange Commission has filed civil charges against three former executives of a ConAgra Foods subsidiary in connection with an alleged scheme to inflate earnings in 1999 and 2000.

Named were James Charles Blue, former president and chief operating officer of ConAgra Agri Products; Randy Cook, former president of North America Operations of United Agri Products; and Victor Campbell, UAP’s former controller.

The SEC alleged that Blue, Cook and Campbell caused ConAgra to file materially false and misleading financial statements in 1999 and 2000. They did so, the regulator elaborated, by participating in a series of fraudulent accounting practices that included the improper recognition of revenue from deferred delivery sales and associated rebates from its suppliers, the failure to record bad debt expenses when realized, and the improper recognition of revenue from advance vendor rebates.

The misconduct caused ConAgra to overstate pre-tax income for fiscal 1999 by $46.7 million (approximately 7.35 percent) and in fiscal 2000 by $48.5 million (approximately 7.85 percent). At the subsidiary level, the actions caused it to overstate operating profit for fiscal 1999 by 16.36 percent and for fiscal 2000 by 34.97 percent.

ConAgra issued a restatement in 2001.

The SEC also alleged that as a result of their misconduct, all three men received larger bonuses, and that Cook received additional inflated compensation through his participation in a profit-based compensation plan.

Blue agreed to settle the SEC’s charges without admitting or denying the allegations in the complaint, according to the commission. He agreed to pay a total of $622,087, which includes $336,362 in disgorgement, $175,725 of prejudgment interest, and a $110,000 civil penalty.

Campbell, who also neither admitted nor denied the SEC allegations, agreed to pay $198,074, which includes $96,893 in disgorgement, $51,181 of prejudgment interest, and a $50,000 civil penalty.

As for Cook, the commission is seeking a permanent injunction against future violations, an officer-and-director bar, and civil penalties. The regulator also seeks to have Cook divest all unexercised stock options and disgorge all ill-gotten gains with prejudgment interest.

Blue, Cook and Campbell could not immediately be reached for comment.