Diamonds Foods is an American packaged food company specializing in marketing nuts. Their brands offered are Pop-Secret, Emerald, and the Kettle Brand. The demand to keep up with the snack food industry eventually caused pressure in the organization that lead to bad accounting practices. “The costs of walnuts were falsified to boost earning and meets estimates of Wall Street” (SEC, 2014). “The increase of walnuts in 2010 also lead to pressure of paying growers more without decreasing the net income to look good to investors” (SEC, 2014). Top management fell to the pressure of the demand to produce numbers that lead the company to be investigated for accounting fraud. The management that initiated the fraud were the former chief financial
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“Diamond foods was accused of “momentum payments,” which were made in September for year 2011 which ended in July” (Daniels, 2015). The walnut growers defended the accusation by stating that they were told to cash their checks even though they were not carrying out their contract with Diamond for 2011. “Diamond conducted an internal investigation and restated the finances for 2010 and 2011 fiscal years” (Wall Street Journal, 2014). “The company’s share once reached $90 a share dropped to $17” (SEC, 2014). The deal fell through with Procter & Gamble because Diamond could not maintain a healthy stock price. It was hard to prove whether the payments were intentionally recorded in the wrong year because the walnut growers deliver at the end of the year but payments are made throughout the year. The company had also started using contracts with terms less than 3 years as before it was 3-10 years terms. However, Mendes should have known the procedures to reach the goals in the financial statements and found him accountable. Mendes agreed to pay a $125,000 penalty without admitting or denying the allegations of knowing the incorrect price of walnut costs and omitted facts to outside auditors about the payments. Company agreed to pay $5 million fine to settle the charges without admitting or denying the allegations. Diamond also replaced both CEO and CFO
“Diamond foods was accused of “momentum payments,” which were made in September for year 2011 which ended in July” (Daniels, 2015). The walnut growers defended the accusation by stating that they were told to cash their checks even though they were not carrying out their contract with Diamond for 2011. “Diamond conducted an internal investigation and restated the finances for 2010 and 2011 fiscal years” (Wall Street Journal, 2014). “The company’s share once reached $90 a share dropped to $17” (SEC, 2014). The deal fell through with Procter & Gamble because Diamond could not maintain a healthy stock price. It was hard to prove whether the payments were intentionally recorded in the wrong year because the walnut growers deliver at the end of the year but payments are made throughout the year. The company had also started using contracts with terms less than 3 years as before it was 3-10 years terms. However, Mendes should have known the procedures to reach the goals in the financial statements and found him accountable. Mendes agreed to pay a $125,000 penalty without admitting or denying the allegations of knowing the incorrect price of walnut costs and omitted facts to outside auditors about the payments. Company agreed to pay $5 million fine to settle the charges without admitting or denying the allegations. Diamond also replaced both CEO and CFO