The Wells notice to Kraft alleges that employees signed documents requested by The Fleming Companies, Dallas, for use in accelerating revenue recognition. No allegations have been made regarding the manufacturer's accounting for transactions with Fleming.
The Wells notice to Dean Foods indicates the SEC is considering a civil injunctive action, also for alleged aiding and abetting of Fleming in acceleration of revenue recognition. Two officers of the Dean Dairy Group subsidiary also have received similar notices. No corporate officers are involved. Specifically, the SEC believes Dean Foods provided Fleming with correspondence that allowed Fleming to characterize two payments totaling $2.7 million made by Dean Foods as current income rather than deferred revenue to be recognized over future periods. There is no allegation by the SEC regarding Dean Foods' financial statements.
Fleming filed for Chapter 11 bankruptcy protection in April and has since divested its wholesale grocery assets. It has been under investigation by the SEC's Fort Worth office over issues surrounding accounting and presentation of earnings.
Kraft also is one of six American food companies subpoenaed for documents this year as part of the SEC's investigation of improper accounting practices at U.S. Foodservice (USF), Columbia, MD, a subsidiary of Royal Ahold. Some $856 million in inflated earnings connected to USF vendor allowances are in question here.
This latest SEC action, in regard to Fleming, may "intensify" questions concerning how food distributors account for "so-called" vendor allowances from suppliers, opines FT.com, the online Financial Times.
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