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When a Fortune 500 company’s “growth engine” was fueled by non-market intersegment deals, investors learned the hard way that segment-level disclosures deserve the same scrutiny as consolidated financials—if not more.
On January 27, 2026, the U.S. Securities and Exchange Commission announced a $40 million civil penalty settlement with Archer-Daniels-Midland Company (NYSE: ADM), one of the largest agricultural commodity processors in the world, for materially inflating the financial performance of its Nutrition business segment across multiple fiscal years.[1] Three former ADM executives were also charged. The SEC’s Division of Enforcement was direct in its assessment: ADM had misled investors by manipulating the very internal transactions that the company had publicly represented were conducted at arm’s length.[2] ADM settled the matter without admitting or denying the SEC’s findings.
On the surface, the mechanics of the fraud were not exotic. ADM’s leadership used retroactive rebates, non-market price adjustments, and one-sided intersegment transfers to redirect operating profit from other business segments into Nutrition—the unit the company had positioned to Wall Street as its premier growth engine.[3] The objective was to create the appearance that Nutrition was delivering the 15 to 20 percent annual operating profit growth that ADM’s executives had publicly projected to investors.[4] In reality, the segment was falling short.
But beneath the surface, the ADM case represents something far more important than a single enforcement action. It is a case study in one of the most persistent—and persistently underappreciated—risks facing institutional investors: the manipulation of segment-level financial reporting.
Segment reporting exists for a reason. Under ASC 280, public companies are required to disclose financial results for their operating segments using what the Financial Accounting Standards Board calls the “management approach”—meaning the disclosures should reflect how management actually organizes and evaluates the business internally.[5] The objective is to allow investors to see the company through the eyes of its own leadership: which units are generating revenue, which are consuming capital, and where value is being created or destroyed.
This matters because consolidated financial statements, by definition, obscure the underlying performance of individual business lines. A company reporting strong consolidated revenue growth might be masking a deteriorating core business with a temporarily profitable acquisition. A company reporting stable margins might be quietly subsidizing an underperforming division with intersegment transfers that have no relationship to market economics.
In ADM’s case, the consolidated numbers told investors almost nothing about the problem. As ADM itself acknowledged, the manipulative intersegment transactions affected segment-level reporting and had no impact on the company’s reported consolidated balance sheet, earnings, or cash flows.[6] That is precisely the point. The fraud was visible exclusively at the segment level—and that is exactly where most investors were not looking carefully enough.
It is worth noting that segment reporting has consistently ranked among the top five issues flagged by the SEC in comment letters to public company registrants.[7] The Commission’s staff has long signaled that segment disclosures are a priority area of review. Investors who treat these disclosures as boilerplate do so at their own peril.
The mechanics of ADM’s fraud were, in retrospect, straightforward—which is part of what makes them so instructive.
ADM operates across several major business segments, including Agriculture Services & Oilseeds, Carbohydrate Solutions, and Nutrition. In its public filings, ADM disclosed that intersegment transactions were recorded at amounts “approximating market,” effectively representing to investors that internal transactions between business units were priced as though they were arm’s-length negotiations between unrelated parties.[8] This is a critical representation. It tells investors that segment-level operating profits reflect genuine economic performance, not internal bookkeeping decisions.
The SEC found that this representation was false (one former executive has contested the SEC’s allegations and the matter remains in litigation). When Nutrition fell short of its operating profit targets, executives directed “adjustments” to intersegment transactions that included retroactive rebates and price changes that were not available to ADM’s third-party customers. These were targeted to specific dollar amounts designed to hit Nutrition’s operating profit goals or mask a shortfall.[9] In practical terms, operating profit was being siphoned from Agriculture Services & Oilseeds and Carbohydrate Solutions and rerouted into Nutrition—not because of any change in market conditions or business performance, but because Nutrition needed the numbers.
The overstatement of Nutrition’s operating profit was approximately 9.2 percent on an annual basis.[10] That figure may not sound dramatic in isolation. But in the context of a segment that ADM had positioned as the centerpiece of its growth narrative—and on which equity analysts were building higher-multiple valuation models—it was material. When ADM disclosed the investigation in January 2024, its stock price fell 24 percent in a single trading session.[11]
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The ADM case offers several forensic indicators that investors should incorporate into their analytical frameworks when evaluating segment-level disclosures.
1. Segments that consistently meet or narrowly exceed guidance deserve extra scrutiny.
ADM’s Nutrition segment was publicly projected to deliver 15 to 20 percent annual operating profit growth.[12] When a business segment consistently meets ambitious targets with precision—particularly a segment operating in a market characterized by volatile commodity inputs and shifting demand—investors should treat the pattern as a signal warranting deeper analysis, not as confirmation of management competence. Consistency in a volatile environment is, counterintuitively, a red flag.
2. Intersegment transaction disclosures that use vague language deserve skepticism.
ADM’s disclosures stated that intersegment transactions were recorded at amounts “approximating market.” This language is common across public company filings and is often accepted at face value. But “approximating market” is not the same as “at market.” It contains inherent subjectivity—and that subjectivity is where manipulation can be concealed. Investors should ask: What is the company’s internal pricing methodology? Is it documented? Is it audited separately? Are there controls preventing retroactive adjustments?
3. Segment-level growth that diverges from industry trends is a signal, not a virtue.
The nutritional ingredients industry experienced meaningful headwinds during the period in question, including weakening demand and uneven profitability.[13] When a company’s segment reports robust growth in an environment where peers are struggling, the most productive investor response is not to assume superior management execution—it is to identify the source of the divergence and verify whether it is real.
4. Executive compensation tied to segment performance creates inherent conflicts.
In ADM’s case, executives had compensation structures directly tied to Nutrition’s performance.[14] This is not unusual—segment-linked incentive structures are widespread—but it creates a direct financial incentive to manage segment results to meet targets. Investors should evaluate whether a company’s internal accounting controls over intersegment transactions are sufficiently independent of the executives whose compensation depends on those results.
The ADM case is not an isolated event. It is symptomatic of a structural vulnerability in how public companies report financial results and how investors consume those reports.
In November 2023, the FASB issued ASU 2023-07, which expanded segment disclosure requirements under ASC 280—specifically requiring enhanced disclosure of significant segment expenses and permitting companies to report multiple measures of segment profit or loss.[15] The update was issued in direct response to investor demand for more granular segment-level information. The timing is not coincidental: the regulatory community has recognized that existing segment disclosures are often insufficient to identify the kinds of manipulation that the ADM case illustrates.
The SEC’s enforcement posture under Chairman Paul Atkins has also signaled a clear focus on traditional fraud areas, including accounting and disclosure fraud.[16] In a January 2026 analysis, the Cleary Gottlieb law firm noted that the Commission’s priorities under its current leadership include insider trading, accounting fraud, and material misrepresentations that harm investors—observing that 2025’s enforcement data reflected a “back to basics” approach.[17] For companies with weak controls over intersegment transactions, the enforcement risk is real and increasing.
But regulatory enforcement, by its nature, is reactive. It addresses fraud after it has occurred, after investors have been harmed, and after market confidence has been damaged. For institutional investors managing fiduciary capital, the imperative is to identify these risks before the enforcement actions, before the restatements, and before the 24 percent single-day declines.
At Buxton Helmsley, our forensic approach to financial analysis has long emphasized that the most consequential disclosures are often the ones investors read least carefully. Segment reporting sits at the top of that list. Based on the patterns we have observed—both in our own campaign work and in enforcement actions like ADM’s—we offer the following framework for institutional investors conducting segment-level due diligence:
Triangulate segment performance against external data. Segment results should be reconcilable, at least directionally, with observable industry conditions, peer performance, and macroeconomic trends. When they are not, the burden of proof should shift to management.
Read the intersegment transaction disclosures with the same rigor applied to related-party transactions. Both involve dealings between parties that are not independent, and both carry inherent risk of being structured to achieve a desired financial outcome rather than reflecting genuine economic activity.
Track segment-level margins over time and compare them to consolidated margins. Persistent divergences—particularly where a segment’s margins are improving while consolidated margins are flat or declining—may indicate internal profit reallocation rather than genuine operational improvement.
Evaluate the independence of internal controls over intersegment pricing. Are the individuals responsible for approving intersegment adjustments independent of the executives whose compensation is linked to the performance of those segments? If the answer is no, the control environment is compromised.
Pay attention to qualitative signals. ADM’s executives were telling investors that Nutrition was a growth engine while internally scrambling to manufacture the results to match. Earnings call narratives that are significantly more optimistic than the observable competitive environment often contain the seeds of future restatements.
The ADM settlement is a $40 million reminder that the line between legitimate management judgment and accounting fraud can be thin—and that intersegment transactions, by their very nature, operate in that gray area. For institutional investors, the lesson is not merely that fraud exists. The lesson is that this particular variety of fraud—segment-level manipulation through internal transactions—is uniquely difficult to detect from consolidated financial statements alone, uniquely resistant to traditional audit procedures, and uniquely consequential when it eventually surfaces.
Segment disclosures are not supplemental information. They are, in many cases, the only window investors have into how a company’s individual business lines are actually performing. When that window is distorted, the investment thesis built upon it is distorted with it.
The companies that manipulate segment results are betting that no one is reading carefully enough. For sophisticated institutional investors, that bet should never be a winning one.
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Referenced Sources
[1] U.S. Securities and Exchange Commission, “SEC Charges ADM and Three Former Executives with Accounting and Disclosure Fraud,” Press Release No. 2026-15, January 27, 2026.
[2] U.S. Securities and Exchange Commission, Administrative Proceeding File No. 3-22588, “In the Matter of Archer-Daniels-Midland Company, Vince Macciocchi, and Ray Young,” Order Instituting Proceedings, January 27, 2026.
[3] U.S. Securities and Exchange Commission, Complaint, “SEC v. Vikram Luthar,” U.S. District Court for the Northern District of Illinois, January 26, 2026.
[4] DTN Progressive Farmer, “ADM Settles SEC Investigation for $40M as Former CFO Luthar Charged With Fraud,” January 28, 2026.
[5] Financial Accounting Standards Board, Accounting Standards Codification Topic 280, “Segment Reporting”; Deloitte, “On the Radar: Segment Reporting,” 2024.
[6] Archer-Daniels-Midland Company, Press Release, as cited in Fortune, “More than 30 years after fraud at Archer Daniels Midland inspired a Matt Damon film, the company was hit with a $40M fine,” January 28, 2026.
[7] Deloitte, “On the Radar: Segment Reporting,” 2024; GAAP Dynamics, “ASC 280 Segment Reporting,” December 2025.
[8] SEC Administrative Proceeding File No. 3-22588 (ADM Order), noting ADM’s periodic filings stated intersegment sales were recorded at amounts “approximating market.”
[9] SEC Press Release No. 2026-15; SEC Complaint against Vikram Luthar, January 26, 2026.
[10] DTN Progressive Farmer, January 28, 2026 (noting the overstatement of annual Nutrition segment operating profit at 9.2 percent).
[11] CFO Dive, “Archer Daniels Midland investor sues firm, CEO, CFO, ex-CFO,” January 26, 2024; Fortune, January 28, 2026.
[12] SEC Administrative Proceeding File No. 3-22588 (ADM Order), referencing ADM executives’ public projections of 15–20 percent annual Nutrition operating profit growth.
[13] Fortune, January 28, 2026 (discussing weakening demand and uneven performance in ADM’s Nutrition business following the 2014 Wild Flavors acquisition).
[14] CFO Dive, January 26, 2024 (noting executive compensation structures tied to Nutrition segment performance).
[15] Financial Accounting Standards Board, Accounting Standards Update No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” November 2023; Ernst & Young, “Technical Line: A closer look at the FASB’s new segment disclosure requirements,” updated September 2024.
[16] Foley & Lardner LLP, “SEC Still Pursuing Accounting Fraud,” January 2026.
[17] Cleary Gottlieb, “The Shifting SEC Enforcement Landscape: 2025 Year-in-Review,” January 2026.
This article is published by Buxton Helmsley USA, Inc. for informational and educational purposes only. It does not constitute investment advice, a solicitation, or a recommendation to buy or sell any security. The views expressed are those of Buxton Helmsley and are based on publicly available information as of the date of publication. Investors should conduct their own due diligence and consult with qualified professionals before making investment decisions.
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