[Flashback] AgFeed Agrees to Pay $18 Million to Settle SEC Accounting Fraud Case


Posted by Amy CHAN Wen Yi, Year 4 undergrad at the School of Accountancy, Singapore Management University

A Chinese animal-feed and hog-production company has agreed to pay $18 million to settle Securities and Exchange Commission allegations that it reported fake revenue to meet financial targets and boost its stock price, the SEC said Monday.

AgFeed Industries Inc. inflated its revenue by $239 million by creating fake invoices for the sale of feed and purported sales of hogs that didn’t actually exist, among other methods, the SEC said when it filed suit against the company in March. The moves boosted the company’s annual revenue over a 3 ½-year period by amounts ranging from 71% to 103%, according to the SEC.

AgFeed, which is in Chapter 11 bankruptcy, didn’t admit or deny the allegations in agreeing to the settlement. Five former AgFeed executives and a former audit committee chairman still face related SEC allegations, also filed in March.

A lawyer for AgFeed couldn’t immediately be reached for comment.

AgFeed is now based in Tennessee, but it was based in China before it merged with a U.S. company in 2010 and spread its operations between the two countries. The company was delisted from the Nasdaq Stock Market in 2012 and filed for bankruptcy protection in 2013.

The case against AgFeed is among more than 20 the SEC has filed against U.S.-traded Chinese companies and their officials over alleged accounting fraud and other issues. Over the past few years, regulators, auditors and investors have raised questions about more than 170 U.S.-traded Chinese companies about their accounting and disclosure practices.

The $18 million settlement will be distributed to victims of the company’s fraud, the SEC said. The settlement is subject to approval by both the Tennessee court where the SEC’s lawsuit was filed and the Delaware court overseeing AgFeed’s bankruptcy


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