The U.S. Securities and Exchange Commission (SEC) has filed a complaint against Diamond Foods, Inc. and two former executives alleging that the company “materially misstated its financial results in multiple SEC Forms 10-Q, 10-K, and 8-K from at least February 2010 and ending in September 2011. In this timeframe, Diamond reported artificially inflated earnings per share that beat Wall Street earnings estimates on a quarterly and yearly basis.” SEC v. Diamond Foods, Inc., No. 14-0123 (U.S. Dist. Ct., N.D. Cal., filed January 9, 2014). Information about shareholder litigation involving the alleged price manipu- lation and financial misstatements at the root of the SEC’s complaint appear in Issue 464 of this Update.
According to the SEC, Diamond Foods has agreed to pay $5 million to settle the charges, and former CEO Michael Mendes has agreed to a settle- ment. The claims against former CFO Steven Neil continue. SEC claims that increasing walnut prices and pressure to meet or exceed Wall Street stock analyst earnings estimates led Neil to orchestrate a scheme that provided two special payments to appease the growers while excluding portions of those payments from year-end financial statements. See SEC Press Release, January 9, 2014.