SEC Charges Newell Brands and Former CEO for Misleading Investors About Sales Performance

The Securities and Exchange Commission today charged Newell Brands Inc., a Georgia-based consumer products company and its former CEO, Michael 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. Both parties agreed to settle the SEC charges.

The SEC’s order finds that, 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. According to the order, 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. 

“Today’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. “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.”

The SEC's order finds that Newell and Polk violated or caused violations of antifraud provisions of the Securities Act of 1933, reporting provisions of the Securities Exchange Act of 1934, and Rule 100(b) of Regulation G. Without admitting or denying the SEC’s findings, Newell and Polk agreed to cease and desist from violating certain provisions of the securities laws and to pay civil penalties of $12.5 million and $110,000, respectively.

The SEC’s investigation was conducted by Nishchay Maskay, Armita Cohen, and Nicholas Brady and accountants John Archfield and Tonya Tullis, with assistance from trial counsel Timothy Halloran and Alex Lefferts of the Enforcement Division’s Office of Investigative and Market Analytics, under the supervision of Sarah Hall, Kristen Dieter, Melissa Armstrong, and Mr. Cave.