Diamond Foods Inc.’s board was accused in a retirement fund’s lawsuit of tarnishing the snack and nut company’s reputation and causing it to misrepresent its current and future financial condition.
The Hialeah, Florida, employees’ retirement system blamed the directors for Diamond’s inability to file its financial statements, resulting in an “expensive and time-consuming internal investigation” at the company and derailing its planned $2.4 billion acquisition of Procter & Gamble Co.’s Pringles division in February.
Diamond plunged 81 percent from Sept. 20 to earlier today, when shares touched a 52-week low of $17.55 before rising 3 cents to $17.58 at 12 noon in Nasdaq Stock Market trading.
Diamond’s directors “had actual or constructive knowledge that they had caused the company to maintain ineffective internal controls,” the retirement system said in the complaint, filed today in Delaware Chancery Court in Wilmington.
San Francisco-based Diamond, the maker of Kettle chips and Emerald snack nuts, said June 11 it won’t file quarterly results on time to meet an extension granted by Nasdaq.
Diamond Foods hasn’t yet filed its 10-Q reports for the quarters ended Oct. 31 and Jan. 31 and will miss the deadline for the quarter ended April 30, it said in a filing with the U.S. Securities and Exchange Commission.
The company announced in February that it would restate earnings for the past two years and replace its chief executive officer and chief financial officer after an internal probe found Diamond booked payments to walnut growers in the wrong period.
“Diamond’s reputation and standing among walnut growers, with whom it needs to continue to do business, is likely inexorably tainted,” the retirement system said in the complaint.
Paul Kranhold and John Christiansen, spokesmen for Diamond, didn’t immediately reply to a phone call and e-mails seeking comment on the complaint.
The case is Board of Trustees of City of Hialeah Employees’ Retirement System v. Mendes, CA7657, Delaware Chancery Court (Wilmington).