Newell Brands, whose brands include Sharpie and Yankee Candle, and former Newell Brands CEO Michael Polk have agreed to settle charges that they misled investors about core sales growth, the Securities and Exchange Commission announced on Friday.
Newell will pay a $12.5 million civil penalty and Polk will pay $110,000, with both agreeing “to cease and desist from violating certain provisions of the securities laws,” the SEC said. Neither has admitted or denied the SEC findings, per that release.
Polk was Newell’s CEO for eight years, leaving in 2019, per his LinkedIn page. Neither he nor his new firm, Berkshire Partners, immediately responded to requests for comment.
Newell Brands acknowledged the penalty and settlement terms in an SEC filing Friday, highlighting that the charges don’t involve any current executive officers and that “the SEC specifically noted the Company’s significant cooperation, as well as improvements made to the Company’s control environment.” Newell declined to comment beyond the filing.
The charges are over actions taken in 2016 and 2017 that inflated 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,” per the SEC’s press release.
Specifically, the SEC said that Newell pulled sales forward into earlier quarters without adequate disclosure and engaged in other accounting practices inconsistent with generally accepted accounting principles, and overrode internal accounting controls. In a statement, Mark Cave, associate director of the SEC’s Division of Enforcement, said that “senior executives of public companies hold positions of trust” and risk that when they interfere with accounting processes in order to minimize weak performance.
“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,” he said.
Newell has continued to struggle. Early in the year, the company laid off 13% of its office staff and hired a new chief executive. In its most recent quarter, net sales fell 13% year over year, core sales fell 11.9% and its net income plunged over 90%.