Diamond Foods Faces SEC Investigation

SAN FRANCISCO (AP) — Diamond Foods Inc. is facing a formal investigation by the Securities and Exchange Commission over crop payments to walnut growers, the food company has disclosed. The company, which makes Emerald Nuts and Pop Secret popcorn, said in a regulatory filing Thursday that it received a formal order of investigation from the SEC on Wednesday.

SAN FRANCISCO (AP) — Diamond Foods Inc. is facing a formal investigation by the Securities and Exchange Commission over crop payments to walnut growers, the food company has disclosed.

The company, which makes Emerald Nuts and Pop Secret popcorn, said in a regulatory filing Thursday that it received a formal order of investigation from the SEC on Wednesday. This follows the company's own investigation into how it accounted for the payments, which some critics say were used to inflate last year's earnings by shifting costs into the current year.

Diamond Foods said it intends to cooperate fully with the SEC. The company says its agreements with growers are confidential and has declined to comment on them publicly.

The dispute over the accounting of these payments has delayed the company's roughly $1.5 billion acquisition of the Pringles chip brand from Procter & Gamble Co. It would be the biggest acquisition for Diamond Foods ever, making it the second-largest snack company in the nation behind PepsiCo Inc. The companies announced the purchase in April and had expected it would close by the end of the year.

Diamond planned to pay for part of the purchase with its stock, but the value of its shares has fallen sharply over the past few months, largely because of the investigation.

The company disclosed last month that several securities class-action lawsuits have been filed in connection with the walnut payment controversy and said more lawsuits are expected.

Diamond said earlier this month that it was delaying the filing of its first-quarter results until the its audit committee investigation into the accounting issue was complete. It expected the committee to be able to finish its investigation by the middle of February.

Shares of the San Francisco-based company fell $2.37, more than 8 percent, to $27.14 in midday trading Thursday.

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