Diamond may be facing a criminal investigation over its accounting practices in the run up to its Pringles bid

Diamond may be facing a criminal investigation over its accounting practices in the run up to its Pringles bid

US snack maker Diamond Foods is reportedly under investigation from federal prosecutors over whether its financial practices involved criminal fraud.

Yesterday (13 January) the Wall Street Journal quoted a source that said the US Attorney's Office in San Francisco is working with stock market watchdog the US Securities and Exchange Commission to probe whether Diamond delayed payments to farmers to make its earnings for the fiscal year ended 31 July look better while it negotiated to buy the Pringles brand from Procter & Gamble.

Neither Diamond or the Attorney's Office gave the paper a comment.

Diamond has had to delay its US$2.35bn acquisition of Pringles over the investigations into its payments to walnut growers, which began as an internal audit but has now drawn in government involvement. Share prices in Diamond have steadily fallen since the investigation was announced.

The WSJ's source said federal agencies will likely wait for Diamond's audit committee to finish its investigation before deciding whether to bring charges. It added that two Diamond executives have retained their own lawyers.

The day before it reported that major Diamond shareholders Del Mar Asset Management and BAMCO had dumped the bulk of their holdings in the company.

Director Joseph Silveira, a member of the snack maker's audit committee who had recused himself from the walnut prices investigation, was found dead in October in an apparent suicide. Diamond insisted his death was not linked to the probe.