UPDATE 1-ADM in talks with U.S. government on bribery probe

Tue Nov 6, 2012 6:39pm EST

* ADM contacted U.S. government on possible violations

* Company says could face civil, criminal penalties

* Employees terminated following internal review

By Tom Polansek

CHICAGO, Nov 6 (Reuters) - Archer Daniels Midland Co , one of the world's top grain traders, said it is negotiating with the U.S. government to resolve possible violations of U.S. foreign bribery laws and could face penalties.

ADM said in a quarterly report filed on Monday that it "initiated discussions" with the Justice Department and Securities and Exchange Commission after recently completing an internal review of questionable transactions relating to grain and feed exports. The transactions may have violated the U.S. Foreign Corrupt Practices Act and other U.S. and foreign laws, according to the company.

The Justice Department and SEC declined to comment.

ADM said it began an internal review of the transactions in August 2008. It voluntarily disclosed the review to the U.S. government and "certain foreign regulators" in March 2009, and has provided periodic updates to the agencies, according to the filing.

ADM declined to provide additional details on the possible violations, but said in a statement that it had terminated employees as a result of the review.

"As soon as we became aware of some questionable transactions, ADM undertook a comprehensive internal investigation and retained an independent auditing firm to conduct its own review," a spokeswoman said in the statement.

ADM could face civil and criminal fines from the potential violations and be forced to give up profits "derived from any contracts involving inappropriate payments," according to the filing.

The company said it had not yet recorded any liability for assessments that might be imposed by government agencies "because the amount cannot be reasonably estimated," but said the potential violations were not expected to have a "material impact" on the business.

GLOBAL NETWORK

Scrutiny of ADM's transactions comes after the company grabbed the attention of the grain industry last month with a move to expand its global network.

ADM sought to speed up the global race for grains trading power with a $2.8 billion bid for smaller Australian shipper GrainCorp.

The global grains sector has undergone significant consolidation this year amid intense competition to feed fast-developing countries seeking food security.

"ADM has a network that's all around the world, so it's difficult to figure out which locations" its potential violations may have occurred in, said Min Tang Varner, an analyst for Morningstar.

The disclosure of negotiations with the U.S. government "will probably bring a not-so-nice taste to investors' mouths," she said, adding that the potential violations should not impact earnings much "unless the company is on the hook for a material amount."

ADM last week reported net earnings of $182 million, or 28 cents per share, for the quarter ended on Sept. 30, down from $460 million, or 68 cents per share, a year earlier.

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