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Wednesday, September 24, 2014
AgFeed Industries to pay $18 million to settle fraud charges
AgFeed Industries, a bankrupt Tennessee-based animal feed company, has agreed to pay back $18 million in alleged illicit profits to settle civil accounting fraud charges, according to a Reuters report.
AgFeed was charged by the Securities and Exchange Commission (SEC) in March in connection with charges that it reported fake revenue from its China operations to help increase its stock price.
The SEC said AgFeed’s management in China kepts two sets of books – a real one and one it presented to investors.
According to the report, AgFeed inflated the company’s revenue by $239 million from 2008 through June 2011. The company used fake invoices for feed and hog sales and inflated hog weights in an attempt to sell them for higher prices. It later reported the made-up hogs had died.
In a rare move, the SEC also charged the company’s former U.S.-based independent audit committee chairman, K. Ivan Gothner. It alleges he and former U.S.-based Chief Financial Officer Edward Pazdro learned about the fraud in China after the company merged with the U.S.-based company but failed to conduct any meaningful investigation or properly disclose it. SEC also charged four Chinese company executives with fraud. This case is still ongoing. Attorneys for Gothner and Pazdro have denied the charges.
The settlement is subject to court approval. The company is settling without admitting or denying the charges. The SEC said the $18 million will be distributed to victims of the fraud.