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 (N.D. Cal., filed January 9, 2014). Information about shareholder litigation involving the alleged price manipulation 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 settlement. 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.


Issue 509

About The Author

For decades, manufacturers, distributors and retailers at every link in the food chain have come to Shook, Hardy & Bacon to partner with a legal team that understands the issues they face in today's evolving food production industry. Shook attorneys work with some of the world's largest food, beverage and agribusiness companies to establish preventative measures, conduct internal audits, develop public relations strategies, and advance tort reform initiatives.