Another rewarding screw-up…

August 9, 2004

In the 10-K that Con-Agra (CAG) filed last week, the company noted that it had put aside $25 million in connection with a three-year old SEC investigation into accounting practices at a former subsidiary, United Agri Products (UAP). In 2001, Con-Agra restated financial results dating back to 1997 because of the way it booked income at UAP, prompting a shareholder suit which named former CFO James O’Donnell — he stepped down at the end of April — as one of the defendants. That suit, which ConAgra was successfully able to get a district court to dismiss, was upheld on appeal by the Eighth Circuit and is now back in district court, where, according to the latest K, Con-Agra lost its most recent request to dismiss. Coincidentally, the same K also includes O’Donnell’s retirement agreement, which provides O’Donnell with various compensation through June 2010. In fiscal 2004, O’Donnell will receive his full salary and bonus, which in 2003, was $1.4 million and will continue to collect his full salary — though not his bonus — in fiscal 2005 and 2006. Con-Agra will also continue to cover O’Donnell’s insurance, including directors and officers insurance, which should come in handy if the shareholder lawsuit is successful.

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