Litigation Release No. 19969 / January 17, 2007

Accounting and Auditing Enforcement Release No. 2542 / January 17, 2007

SEC v. James Charles Blue, Randy Cook and Victor Campbell, United States District Court for the District of Colorado, Civ. Action No. 07-CV-00095 REB-MEH (D.C. January 16, 2007)

SEC Files Financial Fraud Action Against Three Former Senior Executives of United Agri Products, a Former Subsidiary of ConAgra Foods, Inc.

The Commission yesterday filed a civil action charging James Charles Blue, the former President and Chief Operating Officer of ConAgra Agri Products Companies, Randy Cook, the former President of North America Operations of United Agri Products ("UAP"), and Victor Campbell, UAP's former Controller, with participating in a fraudulent scheme to overstate UAP's operating results in 1999 and 2000. The Commission's complaint alleges that the defendants' conduct at UAP, a former subsidiary of ConAgra Foods Inc., caused ConAgra to file with the Commission, and release to the public, materially false and misleading financial statements which were included in its annual reports for 1999 and 2000. As discussed below, defendants Blue and Campbell have agreed to settle this matter without admitting or denying the allegations in the complaint.

The Commission's complaint includes the following allegations:

  • Blue, Cook and Campbell participated in a series of fraudulent accounting practices that included: (1) the improper recognition of revenue from deferred delivery sales and associated rebates from its suppliers; (2) the failure to record bad debt expenses when realized; and (3) the improper recognition of revenue from advance vendor rebates.
  • The defendants' misconduct caused ConAgra to materially overstate its income before income taxes by $46.7 million in fiscal 1999 and $48.5 million in fiscal 2000, an overstatement of approximately 7.35% and 7.85%, respectively. At ConAgra's Agricultural Products' segment level, the defendants' misconduct caused that segment's reported operating profit to be overstated by 16.36% in fiscal 1999, and 34.97% in fiscal 2000.
  • As a result of their misconduct, Blue, Cook and Campbell benefited by obtaining inflated bonus compensation. Cook also received additional inflated compensation through his participation in a profit-based compensation plan.

The Commission's complaint alleges that by engaging in this conduct, the defendants violated the antifraud, internal controls and books and records provisions of the federal securities laws (Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934, and Exchange Act Rules 10b-5 and 13b2-1), and aided and abetted violations of the reporting, books and records, and internal controls provisions of the Exchange Act (Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Exchange Act Rules 12b-20 and 13a-1). Defendant Cook also aided and abetted violations of the antifraud provisions of the federal securities laws (Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5).

Without admitting or denying the allegations in the complaint, Blue and Campbell have consented to the entry of final judgments that enjoin them from violating the federal securities laws described above. Blue also has agreed to pay a total of $622,087, which includes $336,362 in disgorgement, plus $175,725 of prejudgment interest thereon, and an $110,000 civil penalty. Campbell has agreed to pay $96,893 in disgorgement, plus $51,181 of prejudgment interest thereon, and a $50,000 civil penalty, for a total payment of $198,074. The settlement terms are subject to court approval.

As to Cook, the Commission's complaint seeks a permanent injunction against future violations, an officer-and-director bar, and civil penalties. The complaint also seeks to have Cook divest all unexercised stock options, and to disgorge all ill-gotten gains along with prejudgment interest.

The Commission's investigation in this matter is continuing.

SEC Complaint in this matter