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Kraft Heinz Uncovers Employee Procurement Misconduct

U.S. food giant Kraft Heinz continues to address issues related to claims of procurement misconduct after the Securities and Exchange Commission (SEC) subpoenaed the company. An internal probe of the matter revealed evidence of employee misconduct, reports on Monday (May 6) said in Bloomberg.

The company received a second subpoena from the SEC related to its procurement practices, the company announced, after delaying its annual report filing earlier this year as a result of the first subpoena. Though no evidence of misconduct from senior-level management was discovered, the firm is now revealing that it did find misconduct among employees that led to an increase in the cost of products sold, reports said.

“During the course of a thorough internal investigation, some discrepancies were uncovered, which affected the way earnings were calculated between periods,” the company said in a regulatory filing, noting that it will restate earnings for 2016, 2017 and part of 2018. The firm expects the effects of the restatements to be less than 2 percent on earnings per share for each year.

The company said it will also be adjusting some internal controls to mitigate the opportunity for misconduct moving forward.

The SEC’s subpoena coincided with a $15.4 billion write-down for Kraft Heinz in February, sending shares down. Last month, shares dropped again with news that the company’s CEO Bernardo Hees would be replaced by Miguel Patricio in July.

Earlier this year, revelations of the SEC’s probe found that regulators were examining Kraft Heinz’s procurement and supplier management practices, though details remain scarce with regards to exactly which practices or supplier contracts may be in question. It is also unclear how much the SEC’s investigation has impacted Kraft Heinz’s investment plans.

Last year, the company revealed it had cut $1.7 billion in spending to invest in merger and acquisition activity, with Hees pointing to sales, manufacturing and distribution as key focuses for the company at the time.

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