Newell Brands and its former CEO Michael Polk have agreed to pay civil penalties of $12.5 million and $110,000 respectively to the U.S. Securities and Exchange Commission after the SEC charged the company and former CEO with misleading investors about sales performance.
On Friday, the SEC charged the Georgia-based company – which owns outdoor brands Marmot, Coleman, Campingaz, Contigo, ExOfficio, Bubba, Stearns, and Aerobed – and Polk with misleading investors about Newell’s core sales growth, a non-GAAP (Generally Accepted Accounting Principles) financial measure the company used to explain its underlying sales trends.
“(Friday’s) order finds that Newell’s former CEO issued an instruction to ‘scrub’ the company’s accruals after he learned that the company was projecting a ‘massive’ and ‘disappointing’ miss for the quarter,” said Mark Cave, Associate Director of the SEC’s Division of Enforcement, in a release.
The investigation targeted those accounting and sales practices during the third quarter of 2016 and the second quarter of 2017.
Both parties agreed to settle the SEC charges.
Newell has neither admitted nor denied the SEC’s findings, and the settlement does not name any of the current executive officers of the company.
Polk retired from Newell Brands in 2019 after serving as CEO and president since 2011. He had been a member of Newell’s board since 2009.
According to the SEC, in 2016 and 2017, “Newell and Polk took actions that increased the company’s publicly disclosed core sales growth in ways that were out of step with Newell’s actual but undisclosed sales trends, allowing the company to announce ‘strong’ or ‘solid’ results in quarters it internally described as disappointing due to shortfalls in sales.”
The SEC also alleged that Newell pulled sales forward into earlier quarters without adequate disclosure and engaged in accounting practices that were inconsistent with GAAP, while overriding its internal accounting controls.
“Collectively, these measures gave the misleading appearance that Newell had achieved core sales growth in line with its targets and deprived investors of information relevant to an accurate and complete understanding of Newell’s actual sales trends,” the SEC wrote in its filing.
“Senior executives of public companies hold positions of trust, and they risk abusing the duties attendant to their offices when they reach into a company’s accounting control processes as a way of making up for performance shortfalls,” Cave said.
Newell also owns an extensive list of other brands, including Rubbermaid, Crock-Pot, Mr. Coffee, Oster, Graco, and Elmer’s Glue.
In July, Newell Brands announced quarterly sales were $2.2 billion, a 13% decline compared to the prior-year period. Newell’s outdoor and recreation segment generated net sales of $333 million, a drop of 20.9% compared to last year’s Q2 results.