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SEC May Sue General Mills
PROMO Xtra, Feb 5 2004
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General Mills may face a civil lawsuit by the Securities & Exchange Commission over its sales practices and related accounting.
On Tuesday, General Mills said it had been notified by the SEC that investigators may recommend that the SEC take action against the Minneapolis-based food company, CEO Stephen Sanger and/or CFO James Lawrence. The company and the executives have a chance to respond before investigators make a formal recommendation.
The SEC began investigating General Mills' sales procedures in October 2003.
"General Mills believes its sales practices and related accounting comply with all applicable rules and regulations," the company said in a statement. General Mills said it is continuing to cooperate with the SEC in its investigation.
Some reports speculated that the SEC is looking at whether General Mills front-loaded inventory, shipping product to retailers before it was needed on shelf in order to pad sales and therefore inflate its stock value.
The SEC first looked at General Mills' accounting as part of a separate investigation of retailer Ahold. In April 2003, the SEC requested information from a number of packaged goods companies, including General Mills, about their transactions with Ahold's U.S. FoodService after Ahold admitted that U.S. food service executives had inflated rebates from packaged goods suppliers.
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