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The audit committee investigating supplier payment practices at Diamond Foods will require the company restate financial statements from 2010 and 2011 after finding material weakness in the company’s internal controls.Diamond Foods will replace its current current chief executive and chief financial officers, Michael Mendes and Steven Neil. The two have been placed on administrative leave as the company searches for replacements.
“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,” the company’s Chairman Robert Zollars said.
The investigation follows mysterious payments Diamond made to walnut growers. The company said the sizable checks were to secure future supplies, however many of the recipients said they had no plans on delivering crop to Diamond.
Analysts have alleged that Diamond may have delayed payment to growers to offset costs during its fiscal 2011 year, inflating earnings as it entered negotiations with Proctor & Gamble to purchase the Pringles brand for $2.35 billion.
Shares are currently halted and will resume trading at 4:50 p.m. EST.