In the Matter of The Kraft Heinz Co. and Eduardo Pelleissone
Admin. Proc. File No. 3-20523
On September 3, 2021, the Commission instituted and simultaneously settled cease-and-desist proceedings (the "Order") against The Kraft Heinz Co. and Eduardo Pelleissone (collectively, the "Respondents"). In the Order, the Commission found that from the last quarter of 2015 to the end of 2018, The Kraft Heinz Company ("KHC") engaged in various types of accounting misconduct, including recognizing unearned discounts from suppliers and maintaining false and misleading supplier contracts, which improperly reduced the company's cost of goods sold and allegedly achieved "cost savings." KHC, in turn, touted these purported savings to the market, which were widely covered by financial analysts. The accounting improprieties resulted in KHC reporting inflated adjusted "EBITDA," a key earnings performance metric for investors. According to the Order, KHC failed to design and maintain effective internal accounting controls for its procurement division. As a result, finance and gatekeeping personnel repeatedly overlooked indications that expenses were being improperly accounted for. The Commission ordered the Respondents to pay $12,500.00 in disgorgement, $1,711.31 in prejudgment interest, and $62,300,000.00 in civil money penalties, for a total of $62,314,211.31, to the Commission. The Commission also created a Fair Fund, pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, so the penalties paid, along with the disgorgement and interest paid, can be distributed to harmed investors (the "Fair Fund"). See the Commission’s Order: Release No. 10977.
The Fair Fund includes the $62,314,211.31 paid by the Respondents. The Fair Fund has been deposited in an interest-bearing account at the U.S. Department of the Treasury’s Bureau of the Fiscal Service, and any interest accrued will be added to the Fair Fund.
On December 29, 2021, the Commission issued an order appointing Miller Kaplan Arase LLP, as the Tax Administrator of the Fair Fund. See the Commission’s Order: Release No. 34-93878.
On March 8, 2022, the Commission issued an order appointing RCB Fund Services LLC as the Fund Administrator to oversee the administration and distribution of the Fair Fund and set the administrator’s bond amount. See the Commission’s Order: Release No. 34-94380.
On July 14, 2022, the Commission published a notice of the proposed plan of distribution and opportunity for comment and simultaneously published the proposed plan of distribution (“Proposed Plan”). The notice provides the public with 30 days to submit their comments on the Proposed Plan. See the Commission’s Notice: Release No. 34-95277 and the Proposed Plan.
The Proposed Plan provides that the distribution of the Fair Fund shall be made to those injured investors who suffered losses on shares of KHC common stock purchased or acquired between February 26, 2016 and February 21, 2019, inclusive, and who suffered a loss as calculated by the methodology used in the plan of allocation in the Plan.
On September 8, 2022, the Commission issued an order extending time to enter an order approving or disapproving plan of distribution to December 31, 2022. See the Commission’s Order: Release No. 34-95702.
For more information, please contact the Commission:
Office of Distributions