WASHINGTON, Sept 3 (Reuters) - The Kraft Heinz Company
and two former executives have agreed to pay more than
$62 million to settle charges they falsified supplier contracts
to achieve cost savings in a multi-year accounting scheme, the
U.S. securities regulator said on Friday.
The food company engaged in an array of accounting
misconduct from the last quarter of 2015 to the end of 2018
during which it improperly inflated key earnings for investors,
the Securities and Exchange Commission (SEC) said on Friday.
The alleged misconduct began as a result of a "cost savings
gap" leading up to Heinz's 2015 merger with Kraft and continued
for years amid pressure to make good on promises the new company
would "deliver on certain cost savings," according to SEC
Kraft restated its financials in June 2019 after the launch
of an SEC probe, correcting $208 million in improperly
recognized cost savings from nearly 300 transactions, the
Kraft, which did not admit or deny the SEC's findings, said
in a statement that it fully cooperated with the SEC's
investigation and has taken "remedial action and proactive
steps" to boost its policies and controls for financial
The Chicago-based company agreed to pay a $62 million civil
penalty and not commit future violations as part of its
agreement with the SEC. Kraft recorded the penalty in the second
quarter of 2021, the statement said.
Former chief operating officer Eduardo Pelleissone, who was
accused of negligence-based anti-fraud and other controls
violations, agreed to pay a penalty of $300,000 and another
$14,000 in disgorgement.
Former chief procurement officer Klaus Hofmann agreed to pay
$100,000 and was barred from serving as a public company officer
or director for five years in a settlement that is pending court
Neither executive admitted or denied the SEC's findings.
Lawyers for both did not respond immediately to requests for
Warren Buffett's Berkshire Hathaway Inc owns about
26% of Kraft Heinz. Prices of Kraft shares were
little-changed on Friday.
(Reporting by Chris Prentice and Susan Heavey in Washington
Additional reporting by Jonathan Stempel in New York; editing by
Emelia Sithole-Matarise and Steve Orlofsky)