AgFeed Industries Inc. was recently given the green light to sell its U.S. operations to a trio of its competitors, but now, Law360 reports that the staff of the U.S. Securities and Exchange Commission (SEC) has “preliminarily decided to recommend an enforcement action be brought against” it on alleged violations of anti-fraud provisions of securities laws.
The preliminary determination, or Wells notice, was issued in connection to a previously disclosed SEC investigation surrounding accounting errors and irregularities in the Company’s feed mill and legacy farms businesses in China, which resulted in errors and misstatements in the Company’s financial statements from 2007 through the second quarter of 2011.
“The Wells notices do not constitute a formal allegation or a determination that the company or any of the officers violated any law,” AgFeed said in the filing. “Upon receipt of a Wells notice, the recipient has the opportunity to make a "Wells submission" presenting the recipient's positions with respect to the staff's recommendation before the staff makes a formal recommendation to the commission regarding what action, if any, should be brought by the commission.”
The notice raises allegations that AgFeed violated the anti-fraud, reporting, books and records and internal controls provisions of the federal securities laws, according to the filing. Read, “Bankrupt AgFeed Discloses SEC Tentative Action Notice.”
AgFeed filed for Chapter 11 bankruptcy protection in mid-July, and Illinois-based pork producer The Maschhoffs agreed to buy most of AgFeed’s U.S. assets for $79 million in cash but only if no other party came forward offering more.
A dispute with Hormel Food Corp was cited in leading to default on its debt, according to Bloomberg.
For more information on AgFeed’s bankruptcy, read “Murphy Brown, Cohoma Pork, High Plains Pork to buy AgFeed” or “The Maschhoffs agrees to buy Agfeed USA.”