Commodities & Metals

Monsanto Settles With SEC Over Accounting Violations

Chris Lange

Published: February 10, 2016 12:20 pm

Last Updated: January 13, 2020 1:21 pm

The U.S. Securities and Exchange Commission (SEC) recently announced that St. Louis-based agribusiness Monsanto Co. (NYSE: MON) has agreed to pay an $80 million penalty and retain an independent compliance consultant to settle charges that it violated accounting rules and misstated company earnings as it pertained to its flagship product Roundup. At the same time, three accounting and sales executives also agreed to pay penalties to settle charges against them.

Overall, an SEC investigation found that Monsanto had insufficient internal accounting controls to properly account for millions of dollars in rebates offered to retailers and distributers of Roundup after generic competition had undercut Monsanto’s prices and resulted in a significant loss of market share for the company.

The company also booked substantial amounts of revenue resulting from sales incentivized by the rebate programs, but failed to recognize all of the related program costs at the same time. As a result, Monsanto materially misstated its consolidated earnings in corporate filings during a three-year period.

Mary Jo White, chair of the SEC, commented:

Financial reporting and disclosure cases continue to be a high priority for the Commission and these charges show that corporations must be truthful in their earnings releases to investors and have sufficient internal accounting controls in place to prevent misleading statements. This type of conduct, which fails to recognize expenses associated with rebates for a flagship product in the period in which they occurred, is the latest page from a well-worn playbook of accounting misstatements.

Andrew J. Ceresney, director of the SEC’s Division of Enforcement, added:

Improper revenue and expense recognition practices that obscure a company’s true financial results have long been a focus of the Commission. We are committed to vigorously pursuing and punishing corporate executives and other individuals whose actions contribute to the filing of inaccurate financial statements and other securities law violations.

Shares of Monsanto were trading down 0.8% at $90.95 midday Wednesday, with a consensus analyst price target of $106.58 and a 52-week trading range of $81.22 to $126.00.