Diamond Foods Fires CEO, CFO After Audit Committee Finds Books Have Been "Cooked" For The Past Two Years

Tyler Durden's picture




 

First, small momo-favorite companies. Next: entire nations. Finally: the all-seeing, all-dancing central banks. Today, Diamond Foods just fired its CEO and CFO after the audit committee found its books have been cooked, only phrased more politically correct: "the Audit Committee has carefully reviewed the accounting treatment of certain payments to walnut growers. The Audit Committee has concluded that a "continuity" payment made to growers in August 2010 of approximately $20 million and a "momentum" payment made to growers in September 2011 of approximately $60 million were not accounted for in the correct periods, and the Audit Committee identified material weaknesses in the Company's internal control over financial reporting." Cue the class action lawsuits. When everything is said and done, the US investor will find that the Madoff M.O. of "doing business" has simply shifted to corporate America, where courtesy of non-GAAP BS one can report whatever the investing public wants to believe, until it all blows up. In other news, the now fired executives were stunned to discover they are not getting an extra bonus for cooking the books, last heard mumbling "double standard" under their breath. And if anyone wonders why despite the confirmed "bull market" in stocks (driven entirely by the nearly $1 trillion liquidity injection from the ECB in the past 6 months), investors just pulled $1.8 billion out of US mutual funds yet again, this is your answer.

From the press release:

SAN FRANCISCO, Feb. 8, 2012 (GLOBE NEWSWIRE) -- Diamond Foods, Inc. (Nasdaq:DMND - News) today announced that the Audit Committee of its Board of Directors has substantially completed its investigation of the Company's accounting for certain crop payments to walnut growers. The Audit Committee has concluded that the Company's financial statements for the fiscal years 2010 and 2011 will need to be restated. Over the course of the last three months, the Audit Committee has carefully reviewed the accounting treatment of certain payments to walnut growers. The Audit Committee has concluded that a "continuity" payment made to growers in August 2010 of approximately $20 million and a "momentum" payment made to growers in September 2011 of approximately $60 million were not accounted for in the correct periods, and the Audit Committee identified material weaknesses in the Company's internal control over financial reporting.

The Board of Directors is taking a number of corrective actions including the appointment of a new Chief Executive Officer and Chief Financial Officer. Effective immediately, the Board has appointed Director Rick Wolford to serve as Acting President and Chief Executive Officer and Michael Murphy, of Alix Partners, LLP, to serve as Acting Chief Financial Officer. The Company is commencing searches for permanent replacements for the CEO and CFO positions. The Board has also appointed Robert J. Zollars, who previously served as Lead Independent Director, to the position of Chairman of the Board. Michael J. Mendes and Steven M. Neil have been placed on administrative leave from the Company.

"After an extensive and thorough investigation, the Audit Committee concluded that the Company's internal controls were inadequate and that certain grower payments for the 2011 and 2010 crops were not accounted for in the correct periods. As a result, the Company will restate its fiscal years 2010 and 2011 financial statements," said Robert Zollars, Diamond Foods' Chairman. "The Board takes the Company's control and the integrity of its financial statements very seriously, and we are moving aggressively to implement corrective measures, including changes to the Company's leadership."

"I look forward to working with the management team and the terrific employees at Diamond and will be focused on moving the business forward, further driving Diamond's strong brands and helping to find a permanent chief executive," said Rick Wolford, Acting President and Chief Executive Officer.

Diamond is working diligently to complete financial restatements for the affected periods and will file all required reports with the U.S. Securities and Exchange Commission as soon as possible. While the timing of the restatement is difficult to predict at this time, the Company will endeavor to provide updates on timing and other material developments.

Rick Wolford previously served as Chief Executive Officer, President and Chairman of Del Monte Foods. Mr. Wolford began his career in 1967 in the food industry at Dole Foods, where he held a variety of positions, including President of Dole Packaged Foods. He has served as a Director of Diamond Foods since April 2011.

Michael Murphy is currently a Managing Director at Alix Partners, a leading financial consulting firm. He has more than 20 years of broad and varied financial advisory services experience.

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Wed, 02/08/2012 - 17:25 | 2139290 youngman
youngman's picture

This is nuts I tell you...just nuts....

Wed, 02/08/2012 - 17:29 | 2139308 Hippocratic Oaf
Hippocratic Oaf's picture

San Francisco Nuts

Wed, 02/08/2012 - 17:38 | 2139355 Ahmeexnal
Ahmeexnal's picture

Diamond Foods....are they the owners of the Kool-Aid brand?

Wed, 02/08/2012 - 17:57 | 2139410 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

DMND down 40% after hours

Wed, 02/08/2012 - 19:10 | 2139685 TeMpTeK
TeMpTeK's picture

This is Bullish...

Wed, 02/08/2012 - 20:18 | 2139894 Pladizow
Pladizow's picture

Which stellar US Accounting Firm did the last 2yrs audits and how much were they paid for them?

Wed, 02/08/2012 - 21:03 | 2140032 nmewn
nmewn's picture

Mmm, that shouldn't be a tough nut to crack...lol...sorry.

Looks like Deloitte & Touche back in 2009. But of course, it was in "complete compliance" with Sarbanes Oxley ;-)

Thu, 02/09/2012 - 23:59 | 2144680 GMadScientist
Wed, 02/08/2012 - 18:47 | 2139602 ilion
ilion's picture

Could we have this audit committee sent to see the books of the Fed and the ECB? Probably a lot of cooking there too.

Wed, 02/08/2012 - 18:54 | 2139625 Contra_Man
Contra_Man's picture

"First, small momo-favorite companies. Next: entire nations. Finally: the all-seeing, all-dancing central banks."

+1

Well played, Mauer... ahumm, Tyler.

Wed, 02/08/2012 - 19:04 | 2139666 mayhem_korner
mayhem_korner's picture

 

 

Nut jobs.  Good riddance.

Thu, 02/09/2012 - 10:04 | 2141312 StychoKiller
StychoKiller's picture

Completelty Off Topic:  Last night, the ZeroHedge site was unavailable for around two hours.  I recommend that everyone donate some FRNs to the site tyoday, because there is really no alternatives out there!

Thu, 02/09/2012 - 11:12 | 2141602 dugorama
dugorama's picture

wait, what?  why are investors pulling billions out of mutual funds?  Well,one obvious reason is if I'm unemployed or underemployed, I might need that money.  Sure, we can conjecture that it's assest shifting to gold and silver.  But I think it's asset shifting to rent and food.  maybe even nuts.

Wed, 02/08/2012 - 17:26 | 2139299 SillySalesmanQu...
SillySalesmanQuestion's picture

What smells...? Is the something burning honey...?

Wed, 02/08/2012 - 17:28 | 2139303 lizzy36
lizzy36's picture

TAKE AWAY:only TBTF get to cook the books.....duh.

Wed, 02/08/2012 - 17:29 | 2139309 non_anon
non_anon's picture

what fucking news is this, wake up people!!!

Wed, 02/08/2012 - 17:53 | 2139389 Au_Ag_CuPbCu
Au_Ag_CuPbCu's picture

Exactly!  Anyone surprised by this hasn't been paying much attention...just sayin.

Wed, 02/08/2012 - 18:21 | 2139497 non_anon
non_anon's picture

right on!

Wed, 02/08/2012 - 19:01 | 2139655 ilion
ilion's picture

This was probably news to the CEO and the CFO. They probably thought they were doing God's work all along.

Wed, 02/08/2012 - 20:50 | 2139992 non_anon
non_anon's picture

yeah

Wed, 02/08/2012 - 17:29 | 2139313 Buckaroo Banzai
Buckaroo Banzai's picture

Corporations are out of control all over the world, and have been since they hijacked the Federal government back in the late 19th Century.

"Corporations are the dominant force in modern life, surpassing even church and state. The largest are richer than entire nations, and courts have given these entities more rights than people. To many Americans, corporate power seems out of control. According to a Business Week/Harris poll released in September 2000, 82 percent of those surveyed agreed that “business has too much power over too many aspects of our lives.” And the recent revelations of corporate scandal and political influence have only added to such concerns.

Where did this powerful institution come from? How did it get so much power? In Gangs of America: The Rise of Corporate Power and the Disabling of Democracy, author Ted Nace probes the roots of corporate power, finding answers in surprising places.

A key revelation of the book is the wariness of the Founding Fathers toward corporations. That wariness was shaped by rampant abuses on the part of British corporations such as the Virginia Company, whose ill-treatment killed thousands of women and children on forced-labor tobacco plantations, and the East India Company, whose attempt to monopolize American commodities led to the merchant-led rebellion known as the Boston Tea Party.

Because of such attitudes, the word corporation does not appear once in the United States Constitution. At the Constitutional Convention, all proposals to include corporations in that document were voted down by delegates. Corporate attorneys persisted in seeking legal protections for their clients by means of sympathetic court rulings, but until the Civil War such attempts largely failed.

After the Civil War, the tide quickly turned, as lobbyists secured key changes in corporate law and as corporate attorneys won a series of decisions from an increasingly pro-corporate Supreme Court. Nace recounts the key figures who engineered the “corporate bill of rights,” in particular two brilliant strategists: railroad baron Tom Scott and Supreme Court Justice Stephen Field. The book explores in depth the bizarre intrigues that resulted in the infamous “corporations are persons” ruling of 1886, and how that ruling affected the subsequent development of Supreme Court doctrine.

Nace charts the growth of corporate power through the Gilded Age, including the bloody repression of organized labor and the rise of social Darwinist thinking among American elites. He recounts how that expansion came to a halt under the New Deal, as organized labor gained legal protections, social Darwinism fell into disrepute, and Franklin Roosevelt asserted a vision of American society that placed democratic limits on corporate power. To many observers, it seemed that the corporate Frankenstein had finally been tamed by “countervailing power.”

According to Nace, that optimistic view was dashed in the final decades of the twentieth century, as Big Business mounted a remarkable comeback. The corporate political resurgence began with a 1971 memorandum written by Lewis Powell, Jr., shortly before Powell was appointed to the Supreme Court by Richard Nixon. In the memorandum, Powell urged corporate America to apply its full organizational and strategic resources to politics, a course of action that proved highly successful. 

Gangs of America describes the expansion of corporate legal empowerment onto the global stage through international agreements such as the North American Free Trade Agreement, which boosted the legal powers of corporations to the level of sovereign nations. The book pays special attention to recent events, including campaign finance reform, the financial scandals of 2002, and the growing movement to redefine the corporation and limit corporate power.

Ted Nace worked as a researcher on electric utility policy for the Environmental Defense Fund and as staff director of the Dakota Resource Council, a grassroots group seeking to protect farms and ranches from strip mines and other energy projects. In 1985, he founded Peachpit Press, the world’s leading publisher of books on computer graphics and desktop publishing. After selling Peachpit Press to British publishing conglomerate Pearson, Nace felt driven to understand the historical roots of corporate political power. Gangs of America, the result of that quest, features Nace’s engaging, personal, and complex voicethat of a writer, a businessman, and an activist."

http://www.gangsofamerica.com/

Wed, 02/08/2012 - 17:52 | 2139387 juangrande
juangrande's picture

Regarding the ruling in 1886, supposedly the ruling was not in favor of the corporations being granted the plethora of rights. However, the supreme court clerk wrote a summary on the cover of the ruling (as was customary) saying indeed the ruling did grant the rights. Interestingly, the clerk was an ex-employee of the railroad oligarchy. Subsequent courts have refused to review the matter.

Wed, 02/08/2012 - 18:38 | 2139574 Buckaroo Banzai
Buckaroo Banzai's picture

Yes, Nace covers this. There were a lot of dirty, dirty dealings around this topic that have yet to see the light of day.

Wed, 02/08/2012 - 18:55 | 2139634 We need Geronimo
We need Geronimo's picture

Thanks for the link - just downloaded the book.  Large corporations, and their associated influence over individuals is (imo) the worst social change of the last century.  Four banks, five insurance companies, three oil companies, two communications companies.....tell me again how that encourages competition and prevents collusion?

Wed, 02/08/2012 - 17:30 | 2139314 drink or die
drink or die's picture

GRPN down 10% after hours...what a deal!

Wed, 02/08/2012 - 17:35 | 2139338 Cursive
Cursive's picture

@drink or die

They're having a sale on stocks!

- Louis Rukeyser

Wed, 02/08/2012 - 17:38 | 2139358 non_anon
non_anon's picture

i upgraded to everclear 151

Wed, 02/08/2012 - 17:41 | 2139365 drink or die
drink or die's picture

Why even bother when you can get Everclear 190 (or straight ethanol from a medical supply warehouse)?

Wed, 02/08/2012 - 18:02 | 2139422 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

I'll stick with Knob Creek and let you gentlemen blow fire.

Wed, 02/08/2012 - 18:14 | 2139472 WonderDawg
WonderDawg's picture

Knob Creek is one of the few liquors that still make my mouth water to think about, even after almost 9 years of sobriety. Sip one for me.

Wed, 02/08/2012 - 18:20 | 2139490 drink or die
drink or die's picture

So you chose the frontal lobotomy route instead of the "bottle in front of me"?  ;)

Wed, 02/08/2012 - 18:24 | 2139507 non_anon
non_anon's picture

thanks all, you have made my day!!!

Wed, 02/08/2012 - 23:03 | 2140381 WonderDawg
WonderDawg's picture

Yeah, man, I was bad to drink. It nearly killed me. Life is much better now, but there are still times when I wish I could knock back a shot of Knob Creek or Macallan, but I never could stop at just one. There are other ways to take the edge off, though, that don't send me off on a bender.

Wed, 02/08/2012 - 18:27 | 2139523 Temporalist
Temporalist's picture

Stay strong WD! Seeing the world clearly is why so many are here at ZH.

Wed, 02/08/2012 - 20:51 | 2139998 non_anon
non_anon's picture

yep, yep, yep, I'm thankful for ZH and all behind it!

Wed, 02/08/2012 - 23:06 | 2140387 WonderDawg
WonderDawg's picture

Indeed. Sometimes I wish I didn't see it so clearly. I was happier when I was blissfully ignorant. But, on the other hand, trying to prepare for the inevitable collapse offers some peace of mind.

Wed, 02/08/2012 - 18:20 | 2139493 nodhannum
nodhannum's picture

First of all 190 proof alcohol is 95% alcohol not straight C2H5OH.  The only way to get 100% ethanol is to either add some benzene and azeotrope it off, or use 4-5 Angstrom molecular sieves to get rid of the last 5% of H2O.  You don't want to drink the stuff azeotroped off using benzene unless you can afford a liver transplant.

Wed, 02/08/2012 - 18:27 | 2139519 drink or die
drink or die's picture

Which brings me back to investing in GRPN.  Money in the bank to pay for the eventual new liver!

Wed, 02/08/2012 - 18:39 | 2139579 LowProfile
LowProfile's picture

Couldn't you use reverse osmosis?  Just sayn'.

Wed, 02/08/2012 - 20:07 | 2139851 Big Corked Boots
Big Corked Boots's picture

I built a couple of really big stills, i.e. ethanol plants, a few years ago and the ones I did all had the molecular sieve. Some workers made liberal use of the sampling spigot, if ya know whut ah mean. Fun fact: The ethanol shipped in all those railcars has 1% gasoline in it. Feds require that be added at the plant, otherwise you are a distillery, and you pay mucho taxes.

Wed, 02/08/2012 - 18:13 | 2139468 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Make tea, it's the cleanest way.  And do a liver detox afterwards.

Wed, 02/08/2012 - 18:25 | 2139513 non_anon
non_anon's picture

ah, man, I had to give a sigh to the good ol' days!

Wed, 02/08/2012 - 18:25 | 2139514 nodhannum
nodhannum's picture

..."like sounds triggering visual images".  I know, I saw Disney's Fantasia when it first came out!

Wed, 02/08/2012 - 20:32 | 2139937 Cathartes Aura
Cathartes Aura's picture

Allegro non Troppo - the "adult" version of films like Fantasia - parody of Disney-style, brilliantly done.

http://www.imdb.com/title/tt0074121/

Viva Terence McKenna, ceremony & "heroic dosage"

Thu, 02/09/2012 - 11:18 | 2141641 dugorama
dugorama's picture

in 1936?  That makes you, what, 91 years old?

Wed, 02/08/2012 - 20:52 | 2140001 monoloco
monoloco's picture

Thanks for the link, interesting article.

Wed, 02/08/2012 - 18:03 | 2139426 junkyardjack
junkyardjack's picture

I had to make some space in my portfolio for Facebook. What am I the only one still trading?

Wed, 02/08/2012 - 19:16 | 2139707 Rainman
Rainman's picture

Fink feels ya.....he's going all in equities. Pension funds need savin'.

http://www.bloomberg.com/news/2012-02-08/blackrock-s-fink-says-investors-should-be-100-in-equities-take-more-risk.html

 

 

Wed, 02/08/2012 - 17:32 | 2139323 battlestargalactica
battlestargalactica's picture

Something tells me that the CEO and CFO are gonna be 'harvesting' nuts of a completely different kind before long. I mean, come on- its not like they're Wall Street bankers!

SARC< No, in reality I blame the sovereign rodent, gold-standard loving, anti-bail out, paying cash for coffee, laptop private screen-protector using, insurgent, indigenous squirrels for this debacle.

 

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