Kraft Heinz on Friday agreed to pay $62 million as part of a settlement with the Securities and Exchange Commission (SEC) for improper accounting that led to the restatement of several years of financial reporting.

Former Kraft Chief Operating Officer Eduardo Pelleissone and former Chief Procurement Officer Klaus Hofmann were also charged for their role in the alleged scheme, which took place from the fourth quarter of 2015 through the end of 2018. During that period, “procurement employees negotiated agreements with numerous suppliers to obtain upfront cash payments and discounts in exchange for future commitments to be undertaken by KHC, while improperly documenting the agreements in ways that caused the company to prematurely and improperly recognize the expense savings,” according to the SEC’s order.

The alleged improprieties resulted in Kraft reporting inflated adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), a key performance metric for investors.

In May 2019, Kraft disclosed it would restate its financials for 2016, 2017, and the first three quarters of 2018, correcting a total of $208 million in improperly recognized cost savings arising from 295 transactions.

Internal control failures: Kraft failed to design and maintain effective internal accounting controls for its procurement division, according to the SEC. As a result, finance and gatekeeping personnel repeatedly overlooked indications that expenses were being improperly accounted for.

Pelleissone “was presented with several warning signs indicating that expenses were being managed through manipulated supplier agreements,” the SEC stated. Rather than address these risks, he “imposed pressures on the procurement division to deliver unrealistic savings targets,” according to the agency.

Hofmann reported to Pelleissone and allegedly approved several supplier contracts used to further the misconduct, “despite numerous warning signs that should have alerted him that procurement division employees were circumventing KHC’s internal controls in order to achieve cost savings targets,” the SEC stated.

Individual liability: The SEC’s order found both Kraft and Pelleissone violated the negligence-based anti-fraud, reporting, books and records, and internal accounting controls provisions of the federal securities laws. The SEC also found Pelleissone “failed to provide Kraft’s accountants with accurate information and caused Kraft’s reporting, books and records, and internal accounting controls violations.”

In its complaint against Hofmann, filed Friday in the U.S. District Court for the Southern District of New York, the SEC alleged he violated the negligence-based anti-fraud provisions, failed to provide accurate information to accountants, and violated the books and records and internal accounting controls provisions of the federal securities laws.

Without admitting or denying the SEC’s findings, Pelleissone consented to cease and desist from future violations; pay disgorgement and prejudgment interest of $14,211.31; and pay a civil penalty of $300,000.

Hofmann similarly consented to a final judgment permanently enjoining him from future violations; ordering him to pay a civil penalty of $100,000; and barring him from serving as an officer or director of a public company for five years. The settlement with Hofmann is subject to court approval.