SEC Charges Conagra Foods, Inc. in Financial Fraud and Accounting Case

ConAgra Agrees to Pay $45 Million Penalty to Settle Charges

FOR IMMEDIATE RELEASE
2007-142

Washington, D.C., July 25, 2007 - The Securities and Exchange Commission yesterday filed civil charges against ConAgra Foods, Inc., alleging that it engaged in improper, and in certain instances fraudulent, accounting practices during its fiscal years 1999 through 2001, including the misuse of corporate reserves to manipulate reported earnings in fiscal year 1999 and a scheme at its former subsidiary, United Agri-Products (UAP), in 2000 that involved, among other things, improper and premature revenue recognition. ConAgra is a diversified international food company headquartered in Omaha, Neb.

Linda Thomsen, Director of the Commission's Division of Enforcement, said, "This case again illustrates that the Commission will take strong action when a company and its officers engage in accounting fraud that distorts the company's true financial condition. The facts here are particularly troubling because of the number of different improprieties engaged in by Con Agra, the length of time over which they occurred, and the fact that senior management was involved in the misconduct."

Christopher Conte, Associate Director of the Commission's Division of Enforcement, said, "We will expose and address practices that undermine the integrity of financial reporting no matter what form they take - from the misuse of reserves to improper revenue recognition."

In addition, the Commission alleges that during fiscal years 2002-2005, ConAgra's corporate tax department made numerous tax errors, causing the company to improperly account for tax benefits and understate its income tax expense. ConAgra has restated its financial statements for the years 1999 through 2005.

According to the Commission's complaint, without engaging in the improper and at times fraudulent accounting practices, ConAgra would have missed the Wall Street analysts' consensus estimates of the company's earnings per share for at least six of eleven fiscal quarters in fiscal years 1999, 2000 and 2001. ConAgra's reserves misconduct in 1999 caused it to overstate annual reported income by 15% and to overstate earnings per share by more than 10 cents per share. Between the first quarter of fiscal year 1999 and the third quarter of fiscal year 2001 ConAgra misstated its reported income before income taxes by nearly $218.5 million. In fiscal year 2000 the UAP misconduct caused ConAgra to overstate its agricultural products segment's operating profit by approximately 35% and ConAgra's reported income before income taxes by 7.85%. As a result of the income tax errors, ConAgra misstated its reported income tax expense by $105 million.

To settle the charges, ConAgra has agreed to pay a $45 million penalty, which the SEC will seek to place into a Fair Fund for distribution to harmed investors. Without admitting or denying the allegations in the complaint, ConAgra agreed to be permanently enjoined from violating the antifraud, reporting, books and records and internal controls provisions of the federal securities laws. ConAgra also has consented to a review by an independent consultant of its policies and procedures and financial and accounting compliance functions with respect to certain reserve accounts. The settlement is subject to court approval.

Earlier this year, the Commission previously brought settled civil injunctive actions and settled administrative proceedings against six former ConAgra executives, including two former corporate controllers, its former chief financial officer, its former vice president of operations and control, and against two senior executives at UAP. Litigation is currently pending against a third UAP senior executive.

For more information, contact

Linda Thomsen
Director
(202) 551-4500
Division of Enforcement
Securities and Exchange Commission

Antonia Chion
Associate Director
(202) 551-4842
Division of Enforcement
Securities and Exchange Commission

Christopher R. Conte
Associate Director
(202) 551-4834
Division of Enforcement
Securities and Exchange Commission

Daniel Chaudoin
Assistant Director
(202) 551-4952
Division of Enforcement
Securities and Exchange Commission

  Additional materials: Litigation Release No. 20206