The Securities and Exchange Commission alleged that the company's
former Chief Financial Officer, Steven Neil, spearheaded a scheme to
under report how much money the company paid Walnut growers by
pushing the recording of the payments into later fiscal periods.
This manipulative practice allowed the company to report higher net
income and beat analysts' expectations for fiscal quarters in 2010
and 2011, the SEC said.
The accounting scheme led Diamond to restate its financial results
in 2012, the agency added. After the restatement, the company's
stock price fell to $17 per share from a high of $90 a share in
The SEC said that former Chief Executive Officer Michael Mendes, as
head of the company, should have known the walnut pricing was wrong
when he certified the company's artificially inflated financial
In addition to settling with the company, the SEC said Mendes also
agreed to pay a $125,000 penalty to settle the case.
Both the company and Mendes settled without admitting or denying the
In addition to paying the penalty, Mendes has also already forfeited
more than $4 million in bonuses and other benefits, the SEC added.
Neil denies any wrongdoing and plans to fight the SEC's charges at
"Steve Neil didn't do anything wrong," his attorney, Michael Shepard
of Hogan Lovells LLP, told Reuters.
"He followed long-standing company processes and an accounting
treatment that was approved by the company's outside auditor.
"The charges are not based on the facts, but on an effort to turn a
disagreement about accounting into a hunt for a villain," he added.
[to top of second column]
An attorney for Mendes said he was pleased to have the matter behind
An attorney for the company could not be immediately reached.
The SEC's investigation into Diamond predates the tenure of the
agency's current Chair, Mary Jo White, who became the head of the
SEC in the spring of 2013.
However, the charges come at a time when the SEC is starting to ramp
up its focus on investigating accounting fraud cases again.
Accounting fraud was a hot area for the SEC in the early 2000s
following a rash of scandals at companies such as Enron and Worldcom.
In recent years, accounting fell off the radar somewhat as the SEC
turned its attention to bringing cases against banks for their role
in the financial crisis, and to insider-trading by hedge funds.
(Reporting by Sarah N. Lynch; editing by
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