WASHINGTON — The Securities and Exchange Commission (SEC) charged The Kraft Heinz Co. with “engaging in a long-running expense management scheme” resulting in the reinstatement of three years of financial reporting. The Chicago-based company did not admit to or deny the SEC’s findings but agreed to pay a $62 million civil penalty.

The SEC also charged Eduardo Pelleissone, former chief operating officer at Kraft Heinz, and Klaus Hofmann, former chief procurement officer, for misconduct related to the scheme.

The SEC found Kraft Heinz engaged in accounting misconduct that included recognizing unearned discounts from suppliers and maintaining false and misleading supplier contracts from the last quarter of 2015 to the end of 2018. The improprieties reduced the Kraft Heinz’s cost of goods sold and resulted in the company reporting inflated adjusted EBITA, a key earning performance metric for investors, according to the SEC.

Kraft Heinz restated its financials, correcting a total of $208 million in improperly recognized cost savings related to nearly 300 transactions, in June 2019 after the SEC investigation commenced.

The SEC alleged Pelleissone was presented with warning signs that expenses were being managed through manipulated agreements with Kraft Heinz’s suppliers. It also alleged Hofmann approved improper supplier contracts and certified the accuracy and completeness of the procurement division’s financial statements when the misconduct was occurring.

The SEC alleged the company and the two former executives violated multiple federal securities laws, including negligence-based anti-fraud, reporting, books and records and internal accounting controls provisions.

Without admitting to or denying the SEC's findings, Kraft Heinz agreed to pay a civil penalty of $62 million. Pelleissone agreed to pay disgorgement and prejudgment interest of more than $14,000 and pay a civil penalty of $300,000. Hofmann agreed to pay a civil penalty of $100,000 and will be barred from serving as an officer or director of a public company for five years. The settlement with Hofmann is subject to court approval.