Monsanto Fraud Essay

During the fiscal year of 2009 all the way up to 2011 Monsanto began to change its accounting policies on customer rebates as the economic tailspin made Monsanto customers purchase generic versions of roundup this caused Monsanto’s sales to be lower than expected led to the dramatic change. For example, “as a result of the improper accounting, Monsanto met consensus earnings-per-share analyst estimates for fiscal year 2009.” (NYTIMES). As a result this, Monsanto was able to meet Wall Streets expectations and thus increased their stock’s value while everyone else’s stock value was decreasing. To further elaborate, “In 2010, the company again shifted some rebate costs into the next year. The actions inflated Monsanto’s reported profit by $31

The fraud was uncovered after a Monsanto employee decided to whistle blow to the SEC and thus the SEC began the investigation in 2011 after they uncovered that they in fact did improperly accounted for millions of dollars of incentive rebates offered to distributors of its Roundup herbicide. This led to Monsanto having to correct the improper accounting practices and required Monsanto pay $80 million in penalties. As a result, the SEC charged three midlevel employees with orchestrating the fraud and were demanded to pay $135,000 in fines and 2 of those employees which were accountants have been barred. Due to the Dodd Frank act this allowed the Monsanto Employee to come forward and uncover the fraud that was going on and put a stop to it. The first red flag that was missed was how Monsanto was able to shift the costs of the rebates into the fiscal year of 2010 while keeping the sales associated with the rebates in 2009. The second red flag that was missed was how the employee’s stock options were directly correlated to Monsanto’s performance and that any drop in stock price would negatively affect their stocks. For example, “The Monsanto culture is very