SEC Charges Newell Brands and Former CEO with Misleading Investors on Sales Figures

The Securities and Exchange Commission (SEC) has filed charges against Newell Brands Inc., a consumer products company, and its former CEO, Michael Polk. The charges stem from allegations that the company and its former CEO engaged in misleading practices related to Newell's core sales growth figures. Both Newell and Polk have opted to settle the charges with the SEC.

During an investigation, the SEC discovered that in 2016 and 2017, Newell and Polk took actions to artificially inflate the company's publicly disclosed core sales growth, a non-GAAP financial metric utilized to explain underlying sales trends. These actions were inconsistent with Newell's actual but undisclosed sales trends, enabling the company to project a positive image to investors during quarters when internal assessments indicated disappointing results due to sales shortfalls.

According to the SEC's order, Newell adopted practices that manipulated its core sales growth figures, such as shifting sales from later quarters to earlier ones without appropriate disclosure. The company also embraced accounting practices that deviated from Generally Accepted Accounting Principles (GAAP) while overriding its internal accounting controls. These combined actions created a misleading appearance of Newell achieving core sales growth in line with its objectives, depriving investors of pertinent information required for an accurate comprehension of the company's genuine sales trends.

Mark Cave, Associate Director of the Division of Enforcement at the SEC, commented on the case, saying, "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. 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 states 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 findings, both parties have agreed to cease and desist from violating certain provisions of the securities laws. As part of the settlement, Newell Brands will pay a civil penalty of $12.5 million, while Michael Polk will pay $110,000.

This case serves as a reminder of the SEC's dedication to preserving transparency and accountability in financial reporting, ensuring that investors receive accurate and trustworthy information about a company's performance.