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General Mills Probe May Focus on Trade Loading

NEW YORK - "Trade loading," the practice of shipping product ahead of consumption, could be the focus of a Securities and Exchange Commission investigation of General Mills Inc., Dow Jones Newswires reports.

General Mills said late Tuesday it received a "Wells notice" from the commission indicating the agency has made a preliminary decision to file a civil lawsuit against the company and possibly its chief executive and chief financial officer in connection with sales practices and related disclosures.

General Mills announced in October that it received a formal request for information from the SEC about its sales practices and related accounting. The company hasn't offered details about the investigation, but speculation on Wall Street is pointing to the possibility the SEC is questioning whether General Mills shipped product ahead of consumption in order to prop up its stock price.

General Mills may have had incentive to do that because of an agreement it had with Diageo PLC that dated back to General Mills' 2001 acquisition of Pillsbury, according to the Dow Jones report. General Mills agreed to make a payment in May 2003 to Diageo based on General Mills' share price in the 20 trading days preceding April 30, 2003.

General Mills spokesman Tom Forsythe reiterated the company's past statements that its sales practices and accounting comply with all applicable rules and regulations. He declined to provide further comments regarding the nature of the investigation.

A Wells notice gives recipients an opportunity to respond to the SEC before the agency decides whether to bring a civil action.

Several analysts are basing their assumptions regarding the General Mills investigation on a recent Associated Press story that quoted a former General Mills manager who said executives told sales workers to ship extra products to retailers ahead of customer demand.
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