The Kraft Heinz Company (NASDAQ: KHZ) and its former executives agreed to pay more than $62 million to resolve a complaint alleging that they committed accounting misconduct.
On Friday, the U.S. Securities and Exchange Commission (SEC) announced its accounting charges and settlement with Kraft Heinz, its former Chief Operating Officer Eduardo Pelleissone, and its former Chief Procurement Officer Klaus Hofmann.
SEC charges against Kraft Heinz, Pelleissone, and Hofmann
In the complaint, the SEC alleged that Kraft Heinz, Pelleissone, and Hofmann engaged in a long-running expense manipulation scheme. They committed the scheme to inappropriately reduce the food giant’s cost of goods and to achieve its cost savings targets.
According to the Commission, its investigators found that the food giant and its former executives engaged in different types of accounting misconduct from the fourth quarter of 2015 until the end of 2018.
Their alleged improper accounting practices include recognizing unearned discounts from suppliers and maintaining false and misleading supplier contracts. As a result. Kraft Heinz reduced its cost of goods and achieved its cost savings targets during the relevant period. It also resulted in the food giant reporting inflated adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), a key measure of a company’s overall performance.
