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SEC Charges CHS Inc. for Internal Accounting Controls Failures Relating to Rail Freight Trading

Sept. 2, 2022

File No. 3-21022

September 2, 2022 - The Securities and Exchange Commission today announced settled charges against CHS Inc. for violating the reporting, books and records, and internal accounting controls provisions of the federal securities laws. CHS is an agricultural cooperative based in Inver Grove Heights, Minnesota. The SEC found that CHS's deficient internal accounting controls allowed a rail freight trader formerly employed at CHS to commit fraud, which caused the company to file inaccurate reports with the Commission.

According to the SEC's order, from at least 2014 through 2018, a former CHS rail freight trader manipulated the quantities and values of certain of the company's rail freight contracts. The order finds that the rail freight trader was able to do this because of CHS's insufficient internal accounting controls. According to the order, CHS allowed the employee to both execute trades and determine their valuations. The SEC's order finds that, as a result of the employee's misconduct, CHS filed materially false financial statements with the Commission from 2014 through 2018.

The SEC's order finds that CHS violated the reporting, books and records, and internal accounting controls provisions of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder. Without admitting or denying the findings, CHS has agreed to cease and desist from committing or causing any future violations of these provisions. The SEC's order as to CHS notes CHS's significant cooperation with the SEC's investigation, including its self-reporting to SEC staff, as well as its remedial efforts, and also notes that this cooperation and remediation were taken into account in the determination to accept the company's settlement offer.

In a separate proceeding, the SEC charged the former rail freight trader, David Pope, with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The SEC also charged Pope with violating Exchange Act Section 13(b)(5) and Rule 13b2-1 thereunder, and with aiding and abetting violations of Exchange Act Sections 13(a) and 13(b)(2)(A) and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder. The SEC seeks permanent injunctions, disgorgement with prejudgment interest, and a civil penalty against Pope.

The SEC's investigation was conducted by Jason Rose and Laura Bennett and was supervised by David Reece and Eric Werner.

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