Diamond Foods will pay a fine of US$5m to settle charges related to an accounting scandal that saw the company delay recording payments to walnut growers in order to inflate profits.
Between 2010 and 2011, Diamond’s then-CFO Steven Neil fraudulently under-reported money paid to walnut growers in order to boosted reported net earnings, the US Securities and Exchange Commission said yesterday (9 January).
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Neil and then CEO Michael Mendes were replaced after an internal investigation uncovered the improper accounting. Diamond also had to re-state accounts for two financial years.
“Diamond Foods misled investors on Main Street to believe that the company was consistently beating earnings estimates on Wall Street,” said Jina Choi, director of the SEC’s San Francisco regional office. “Corporate officers cannot manipulate fiscal numbers to create a false impression of consistent earnings growth.”
Both Diamond Foods and former chief executive Michael Mendes have reached settlements with the securities regulator. Mendes will pay a fine of $125,000 and has already forfeited or returned more than $4m he received in bonuses for the 2010-11 period. Litigation against Neil is ongoing, the SEC added.
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