Diamond Foods Fraud
Allegations of Diamond Foods Inc.’s’ Understatement of Accounts Payable.
Abstract On November 1, 2011, Diamond Foods Inc.’s (NASDAQ: DMND) unexpectedly disclosed serious discrepancies (possible understatement of accounts payable) regarding its 2011 financial statement reports and as a result announced its decision to delay its acquisition of the Pringles snack business from Procter & Gamble Company (P&G) (NYSE: PG). Naturally, the November 1, 2011 confession caused an immediate plunge of Diamond Food’s stock price, but worse, it triggered several lawsuits from furious investors and created rumors about the future viability of the company. The purpose of this study is to determine the facts and critically analyze the cause and effect of Diamonds Food’s allegedly financial statement fraud and attempt to make a prediction about the future of this company.
Allegations of Diamond Foods Inc.’s’ Understatement of Accounts Payable Introduction Diamond Foods’ core competency is in its innovative food packaging methods and marketing abilities. The company which brands includes; Kettle Brand Potato Chips, Emerald Premium Snacks, Pop Secret Popcorn, and Diamond Culinary Nuts, was clearly in an expansionary mode prior to its November 1, 2011 financial statement revelations. For example, in his 2010 letter to Diamond stakeholders, the Chairman, President and Chief Executive Officer, Michael J. Mendes, announced that “Diamond Foods had a transformational year in 2010…with strong growth and profitability in the core business…the company acquired and successfully integrated the global operations of Kettle Foods…once again generated record earnings while continuing to invest in brands, innovation, operational infrastructure and people” (p. 1). Undoubtedly, in the last couple of years, Diamond was on a clear trajectory to significantly expand its market share by acquiring other snack food companies. According to a
Abstract On November 1, 2011, Diamond Foods Inc.’s (NASDAQ: DMND) unexpectedly disclosed serious discrepancies (possible understatement of accounts payable) regarding its 2011 financial statement reports and as a result announced its decision to delay its acquisition of the Pringles snack business from Procter & Gamble Company (P&G) (NYSE: PG). Naturally, the November 1, 2011 confession caused an immediate plunge of Diamond Food’s stock price, but worse, it triggered several lawsuits from furious investors and created rumors about the future viability of the company. The purpose of this study is to determine the facts and critically analyze the cause and effect of Diamonds Food’s allegedly financial statement fraud and attempt to make a prediction about the future of this company.
Allegations of Diamond Foods Inc.’s’ Understatement of Accounts Payable Introduction Diamond Foods’ core competency is in its innovative food packaging methods and marketing abilities. The company which brands includes; Kettle Brand Potato Chips, Emerald Premium Snacks, Pop Secret Popcorn, and Diamond Culinary Nuts, was clearly in an expansionary mode prior to its November 1, 2011 financial statement revelations. For example, in his 2010 letter to Diamond stakeholders, the Chairman, President and Chief Executive Officer, Michael J. Mendes, announced that “Diamond Foods had a transformational year in 2010…with strong growth and profitability in the core business…the company acquired and successfully integrated the global operations of Kettle Foods…once again generated record earnings while continuing to invest in brands, innovation, operational infrastructure and people” (p. 1). Undoubtedly, in the last couple of years, Diamond was on a clear trajectory to significantly expand its market share by acquiring other snack food companies. According to a
References: Alpert, B. (2011, November 5). Getting to the nut of the problem. Barron.com. 1-3. Retrieved from http://online.barrons.com/article/SB500014240527487042 70204577013933878950486.html Andrejczak, M. (2011, November 2). Diamond Foods cracks under audit probe. MarketWatch. 1-1. Retrieved from http://www.marketwatch.com/story/diamond-foods-cracks-under-audit-probe-2011-11-02 Business Wire (2011, November 8) Mendes, M. (2010). Stakeholder Letter. Diamond Foods 2010 Annual Report. San Francisco, CA. 1-56. Retrieved from http://phx.corporate-ir.net/phoenix.zhtml?c=189398&p=irol-reportsannual Public Company Accounting Oversight Board (PCAOB) Source: Diamond Foods Inc. 2010 Annual Report. Table – 3. Diamonds’ stock performance on November 10, 2011.