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UPS Settles $45 Million SEC Fine Over Alleged Improper Valuation of Freight Business

United Parcel Service (UPS), the Sandy Springs-based shipping giant, has agreed to pay a $45 million fine to settle allegations by the U.S. Securities and Exchange Commission (SEC). The case revolves around accusations that UPS improperly valued its struggling UPS Freight unit, misrepresenting earnings and violating federal accounting and disclosure standards.

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The SEC’s AllegationsUPS Agrees to $45M Settlement With SEC Over Valuation Claim

The SEC claims that UPS misrepresented its financial performance by failing to follow Generally Accepted Accounting Principles (GAAP) in the valuation of its UPS Freight unit. This division, described as one of UPS’s poorest-performing businesses, was sold to Canadian trucking company TFI International in 2021.

The SEC found that in 2019, UPS internally determined that the freight business was worth between $350 million and $650 million, reflecting that nearly $500 million of goodwill tied to the unit was “impaired,” or had lost value. However, UPS allegedly ignored its internal analysis and instead relied on an external consultant’s valuation of approximately $2 billion.

Critically, the SEC asserts that UPS failed to provide the consultant with adequate information for a proper evaluation, resulting in an inflated valuation that did not accurately reflect market conditions. Consequently, UPS did not record a goodwill impairment in 2019, which would have significantly reduced its earnings and shareowners’ equity.

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A Pattern of Misrepresentation

The SEC’s investigation revealed a pattern of questionable disclosures. In the third quarter of 2020, as UPS negotiated a sale of its freight division for significantly less than its carrying value, the company claimed in filings with the SEC that there were “no events or changes” indicating the goodwill of UPS Freight was impaired.UPS Settles With SEC Over Freight Business Valuation | Transport Topics

Even in October 2020, after UPS signed a nonbinding term sheet to sell UPS Freight for $800 million, the company did not disclose this information to its consultant. The consultant once again valued the business at around $2 billion. These actions, the SEC alleges, constituted a failure by UPS to provide reliable fair value estimates, undermining transparency and shareholder trust.

In January 2021, UPS finalized the sale of UPS Freight to TFI International for $800 million, a figure that was subject to further adjustments and significantly lower than the unit’s reported value.

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The Settlement and Its Implications

Without admitting or denying the SEC’s allegations, UPS has agreed to a settlement that includes a $45 million civil penalty and several corrective actions. These include implementing employee and director training programs, hiring a compliance consultant, and ceasing and desisting from future violations.UPS Agrees to $45M Settlement With SEC Over Valuation Claim

In a statement, UPS assured stakeholders that the settlement “will not have a material effect on our business, financial condition, results of operations, or liquidity.” The company also noted that it had previously disclosed the SEC investigation to the public.

Goodwill Impairment and Financial Impacts

Goodwill impairment, the devaluation of intangible assets tied to a company’s brand or reputation, can significantly affect financial results. By failing to recognize a goodwill impairment in 2019, the SEC argues that UPS artificially inflated its earnings and shareholder equity.

Melissa Hodgman, Associate Director of the SEC’s Enforcement Division, underscored the importance of accurate valuations. “It is essential for companies to prepare reliable fair value estimates and impair goodwill when required. UPS fell short of these obligations, repeatedly ignoring its own well-founded sale price estimates for Freight in favor of unreliable third-party valuations,” Hodgman stated.

Ongoing SEC Investigation

While the SEC has concluded its investigation into UPS’s conduct, it emphasized that its broader inquiry is ongoing. As part of the settlement, UPS has agreed to cooperate fully, providing documents, testimony, and interviews as requested.UPS to Sell UPS Freight to TFI International Inc. | Supply Chain Magazine

The case highlights the SEC’s commitment to enforcing rigorous accounting and disclosure standards to protect investors. Companies that fail to adhere to these standards risk significant penalties and reputational damage.

Lessons for Corporate Governance

The SEC’s findings expose shortcomings in UPS’s internal controls and decision-making processes. Experts point to this case as a reminder of the importance of corporate governance, transparency, and adherence to financial regulations.

For UPS, the settlement offers an opportunity to rebuild trust and demonstrate a commitment to ethical business practices. The company’s agreement to implement compliance training and work with a consultant reflects a recognition of the need for improvement.

What’s Next for UPS?

Despite the controversy, UPS remains a powerhouse in the shipping and logistics industry. The company’s market dominance and robust financial performance suggest that this settlement, while significant, is unlikely to derail its long-term trajectory.UPS to Pay $45 Million SEC Penalty Over Improper Valuation

However, the case serves as a cautionary tale for companies navigating financial challenges. Accurate reporting, adherence to GAAP, and transparent communication with stakeholders are not just regulatory requirements—they are essential for maintaining credibility and investor confidence.

As UPS moves forward, it will need to demonstrate that it has learned from this episode, prioritizing accountability and ensuring compliance across all levels of its organization.

For now, the $45 million penalty is a stark reminder of the stakes involved in corporate financial reporting—and a clear signal from the SEC that accountability matters.

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