This case was last updated from U.S. District Courts on 11/05/2021 at 16:54:12 (UTC).

U.S. Securities and Exchange Commission v. Hofmann

Case Summary

On September 3, 2021, the United States Securities and Exchange Commission (the “SEC” or the “Plaintiff”), represented by James Patrick Connor, attorney at SEC’s DC regional office, filed a civil enforcement action against Klaus Hofmann (“Hofmann” or the “Defendant”), seeking injunctive relief along with payment of civil monetary penalties for the alleged misconduct on part of the Defendant. This case was filed in the U.S. District Court in the Southern District of New York.

In the complaint Plaintiff alleged that, “This action concerns a multi-year expense management scheme by Kraft Heinz Company (“KHC”)’s procurement division to improperly reduce KHC’s cost of goods sold and achieve costs savings targets that were externally touted to the market and internally tied to performance-based targets. The misconduct resulted in KHC reporting inflated earnings before interest, taxes, depreciation and amortization (“EBITDA”), a key performance metric for investors. Specifically, from the fourth quarter of 2015 through the end of 2018 (the “Relevant 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.”

Plaintiff further alleged that, “Procurement division employees, however, negotiated and maintained false and misleading supplier contracts that made it appear as if expense savings were provided in exchange for past or same-year actions performed by KHC when, in reality, they were upfront payments in exchange for a future benefit from KHC, in order to improperly recognize costs savings prematurely. Over the Relevant Period, KHC entered into approximately 59 transactions which were improperly recognized as a result of the false and misleading documentation negotiated and generated by procurement division employees.”

Plaintiff also alleged that, “These misleading transactions, along with numerous other misstated accounting entries, led KHC, in June 2019, to restate its financial statements in its annual report on Form 10- K filed with the SEC. Hofmann, KHC’s Chief Procurement Officer during the Relevant Period, managed the procurement division and was responsible for, among other things, approving certain of KHC’s contracts with suppliers. Despite numerous warning signs that should have alerted Hofmann that KHC procurement division employees were circumventing KHC’s internal controls in order to achieve artificial cost savings targets in supplier contracts, Hofmann negligently approved and failed to prevent supplier contracts that masked the true nature of the transactions.”

There are four claims for relief laid down by Plaintiff. The first claim for relief deals with the alleged violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act. The second claim for relief deals with the alleged violations of Rule 13b2-1 of the Securities Exchange Act. The third claim for relief deals with the alleged violations of Rules 13b2-2 of the Securities Exchange Act. The fourth claim for relief deals with the alleged violations of Section 13(b)(5) of the Securities Exchange Act.

In the prayer for relief, Plaintiff has requested the court to permanently restrain and enjoin Hofmann from violating the federal securities laws alleged in the complaint, order Hofmann to pay civil monetary penalties pursuant to Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)] and Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)], and order that Hofmann be barred from acting as an officer or director of any public company.

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Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    1:21-CV-07407

  • Filing Date:

    09/03/2021

  • Case Status:

    Disposed - Other Disposed

  • Case Type:

    Finance - Security/Commodity/Exchange

Judge Details

Presiding Judge

Ronnie Abrams

 

Party Details

Plaintiff

U.S. Securities and Exchange Commission

Defendant

Klaus Hofmann

Attorney/Law Firm Details

Plaintiff Attorney

James Patrick Connor

Attorney at U.S. Securities and Exchange Commission (DC)

100 F Street, Ne

Washington, DC 20549

 

Court Documents

#7

(#7) FINAL JUDGMENT AS TO DEFENDANT KLAUS HOFMANN: IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that Defendant is permanently restrained and enjoined from violating Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 ("Securities Act") [15 U.S.C. 77q(a)(2), (3)] in the offer or sale of any security by the use of any means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly: (a) to obtain money or property by means of any untrue statement of a material fact or any omission of a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; (b) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser. IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant is liable for a civil penalty in the amount of $100,000 pursuant to Section 21(d)(3) of the Exchange Act [15 U.S.C. 78u(d)(3)] and Section 20(d) of the Securities Act [15 U.S.C. 77t(d)]. Defendant shall satisfy this obligation by paying $100,000 to the Securities and Exchange Commission within 30 days after entry of this Final Judgment. IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that this Court shall retain jurisdiction of this matter for the purposes of enforcing the terms of thi s Final Judgment. (Signed by Judge Ronnie Abrams on 9/9/2021) (rro) (Entered: 09/09/2021)

#8

(#8) INTERNET CITATION NOTE: Material from decision with Internet citation re: #7 Judgment. (sjo) (Entered: 09/28/2021)

5 #2

Exhibit Proposed Final Judgment

5 #1

Exhibit Consent of Klaus Hofmann

5 #5

Main Document

4 #4

Text of Proposed Order

4 #3

Exhibit Certificate of Good Standing (DC)

4 #2

Exhibit Certificate of Good Standing (VA)

4 #1

Affidavit

4 #4

Main Document

3 #4

Text of Proposed Order

3 #3

Certificate of Good Standing (VA)

3 #2

Certificate of Good Standing (DC)

3 #1

Affidavit

3 #3

Main Document

8 More Documents Available
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Docket Entries

  • 09/28/2021
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  • Docket(#8) INTERNET CITATION NOTE: Material from decision with Internet citation re: #7 Judgment. (sjo) (Entered: 09/28/2021)

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  • 09/09/2021
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  • Docket(#7) FINAL JUDGMENT AS TO DEFENDANT KLAUS HOFMANN: IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that Defendant is permanently restrained and enjoined from violating Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 ("Securities Act") [15 U.S.C. 77q(a)(2), (3)] in the offer or sale of any security by the use of any means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly: (a) to obtain money or property by means of any untrue statement of a material fact or any omission of a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; (b) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser. IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant is liable for a civil penalty in the amount of $100,000 pursuant to Section 21(d)(3) of the Exchange Act [15 U.S.C. 78u(d)(3)] and Section 20(d) of the Securities Act [15 U.S.C. 77t(d)]. Defendant shall satisfy this obligation by paying $100,000 to the Securities and Exchange Commission within 30 days after entry of this Final Judgment. IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that this Court shall retain jurisdiction of this matter for the purposes of enforcing the terms of thi s Final Judgment. (Signed by Judge Ronnie Abrams on 9/9/2021) (rro) (Entered: 09/09/2021)

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  • 09/09/2021
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  • Docket(#6) ORDER granting #4 Motion for James Patrick Connor to Appear Pro Hac Vice (HEREBY ORDERED by Judge Ronnie Abrams)(Text Only Order) (arc) (Entered: 09/09/2021)

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  • 09/08/2021
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  • Docket(#5) NOTICE of Filling of Consent and Proposed Final Judgment. Document filed by U.S. Securities and Exchange Commission. (Attachments: #1 Exhibit Consent of Klaus Hofmann, #2 Exhibit Proposed Final Judgment).(Connor, James) (Entered: 09/08/2021)

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  • 09/08/2021
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  • Docket>>>NOTICE REGARDING PRO HAC VICE MOTION. Regarding Document No. #4 MOTION for James Patrick Connor to Appear Pro Hac Vice . Motion and supporting papers to be reviewed by Clerk's Office staff.. The document has been reviewed and there are no deficiencies. (bcu) (Entered: 09/08/2021)

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  • 09/07/2021
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  • Docket(#4) MOTION for James Patrick Connor to Appear Pro Hac Vice . Motion and supporting papers to be reviewed by Clerk's Office staff. Document filed by U.S. Securities and Exchange Commission. (Attachments: #1 Affidavit, #2 Exhibit Certificate of Good Standing (VA), #3 Exhibit Certificate of Good Standing (DC), #4 Text of Proposed Order).(Connor, James) (Entered: 09/07/2021)

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  • 09/07/2021
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  • Docket>>>NOTICE REGARDING DEFICIENT MOTION TO APPEAR PRO HAC VICE. Notice to RE-FILE Document No. #3 MOTION for James Patrick Connor to Appear Pro Hac Vice . Motion and supporting papers to be reviewed by Clerk's Office staff.. The filing is deficient for the following reason(s): The affidavit does not have the case number included. Re-file the motion as a Motion to Appear Pro Hac Vice - attach the correct signed PDF - select the correct named filer/filers - attach valid Certificates of Good Standing issued within the past 30 days - attach Proposed Order. (aea) (Entered: 09/07/2021)

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  • 09/07/2021

  • DocketCase Designated ECF. (sj) (Entered: 09/07/2021)

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  • 09/07/2021

  • DocketMagistrate Judge Robert W. Lehrburger is so designated. Pursuant to 28 U.S.C. Section 636(c) and Fed. R. Civ. P. 73(b)(1) parties are notified that they may consent to proceed before a United States Magistrate Judge. Parties who wish to consent may access the necessary form at the following link: #https://nysd.uscourts.gov/sites/default/files/2018-06/AO-3.pdf. (sj) (Entered: 09/07/2021)

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  • 09/07/2021

  • DocketCASE OPENING INITIAL ASSIGNMENT NOTICE: The above-entitled action is assigned to Judge Ronnie Abrams. Please download and review the Individual Practices of the assigned District Judge, located at #https://nysd.uscourts.gov/judges/district-judges. Attorneys are responsible for providing courtesy copies to judges where their Individual Practices require such. Please download and review the ECF Rules and Instructions, located at #https://nysd.uscourts.gov/rules/ecf-related-instructions..(sj) (Entered: 09/07/2021)

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  • 09/07/2021

  • Docket***NOTICE TO ATTORNEY REGARDING PARTY MODIFICATION. Notice to attorney James Patrick Connor. The party information for the following party/parties has been modified: U.S. Securities and Exchange Commission; Klaus Hofmann. The information for the party/parties has been modified for the following reason/reasons: party role was entered incorrectly. (sj) (Entered: 09/07/2021)

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  • 09/03/2021
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  • Docket(#3) FILING ERROR - DEFICIENT DOCKET ENTRY - MOTION for James Patrick Connor to Appear Pro Hac Vice . Motion and supporting papers to be reviewed by Clerk's Office staff. Document filed by U.S. Securities and Exchange Commission. (Attachments: #1 Affidavit, #2 Certificate of Good Standing (DC), #3 Certificate of Good Standing (VA), #4 Text of Proposed Order).(Connor, James) Modified on 9/7/2021 (aea). (Entered: 09/03/2021)

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  • 09/03/2021
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  • Docket(#2) CIVIL COVER SHEET filed..(Connor, James) (Entered: 09/03/2021)

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  • 09/03/2021
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  • Docket(#1) COMPLAINT against Klaus Hofmann. Document filed by U.S. Securities and Exchange Commission..(Connor, James) (Entered: 09/03/2021)

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