Diamond Foods to pay $5M to settle SEC fraud case
San Francisco-based snack food company Diamond Foods will pay $5 million to settle civil charges that the company and two former top executives misled investors by lying about walnut costs to boost earnings, regulators said Thursday.
In addition to the settlement with the company, Diamond's former CEO Michael Mendes also agreed to pay a $125,000 penalty and settle without admitting or denying the charges, the Securities and Exchange Commission said.
The company's former chief financial officer, Steven Neil, is fighting the SEC charges.
The SEC alleges that Neil directed the effort to fraudulently underreport money paid to walnut growers by delaying the recording of payments into later fiscal periods.
"By manipulating walnut costs, Diamond correspondingly reported higher net income and inflated earnings to exceed analysts' estimates for fiscal quarters in 2010 and 2011," the SEC said in a statement.
After Diamond restated its financial results in November 2012 to reflect the true costs of acquiring walnuts, the company's stock price slid to just $17 per share from a high of $90 per share in 2011, the statement said.
—By Reuters with CNBC.com.