NEW YORK (TheStreet) -- Diamond Foods (DMND) was able to remove a cloud hanging over the embattled snacks maker after it agreed to a $5 million settlement with the Securities and Exchange Commission on what the regulator alleges was an accounting fraud perpetrated by the company's former CFO Steven Neil and its CEO Michael Mendes, which allowed the company to misrepresent its financial condition to public shareholders.
While the SEC filed a complaint against Neil and a cease and desist order against Mendes, Diamond Foods will neither admit nor deny wrongdoing in its $5 million settlement.
Neil and Mendes are accused of under-reporting Diamond Foods' walnut procurement expenses in order to manipulate the company's profitability higher, meeting financial targets. Those accounting misrepresentations, when unmasked by an independent review of Diamond Foods finances, caused shares in the company to plummet in early 2012.
The SEC said on Thursday its settlement with Diamond took into account the firm's cooperation on their investigation and remedial efforts that were implemented once the fraud came to light. Diamond Foods hired restructuring specialist AlixPartners and interim CEO Brian J. Driscoll, to clean up the company's finances. As a result of Diamond Foods alleged financial fraud, the firm was forced to restate multiple years of earnings and was unable to file updated financial reports, putting the company in breach of debt covenants and nearly causing the delisting of its stock from Nasdaq.
Mendes, the former CEO, has agreed to pay a $125,000 penalty without admitting or denying the SEC's allegations. The former executive also forfeited $4 million in bonuses and benefits, the SEC said. On Thursday, the SEC filed a civil action on multiple counts of securities laws violations against Neil.