SAN DIEGO (TheStreet) -- If nothing else, the government's case against Diamond Foods (DMND) should be a reminder that some companies and execs -- even today, with laws supposedly in place to deter malfeasance -- will pull out all stops to blatantly manipulate earnings in an effort to beat the street.
The Securities and Exchange Commission announced Thursday it had sued the company, its former CEO Michael Mendes and CFO Steven Neil.
The company and Mendes have settled. Neil hasn't. His attorney told the Wall Street Journal he didn't settle because he did nothing wrong.
That'll be something for the courts to decide, but the lawsuit should be required reading because the charges read straight out of a "how to fool investors" handbook.
The Diamond story, with questionable accounting first unearthed by the research firm Off Wall Street, and written about several times in Barron's -- back when nobody cared -- suggested the company was manipulating the timing of walnut payments to farmers.
It was a classic case of the company and bullish analysts trying to discredit the critics.
The SEC's lawsuit, however, shows just how crafty a company can be. These three paragraphs sum it up:
"In February 2010, Diamond CFO Neil instructed members of the Finance Team to adjust the walnut cost to hit an EPS target for the second quarter. Members of the Finance Team provided Neil with a walnut cost estimate that would result in reported EPS that would be higher than the consensus analyst estimates of $0.47 per share for the quarter. Based on these calculations, Neil reduced the existing walnut cost estimate of 82 cents per pound by 10 cents per pound, to 72 cents per pound. Diamond's quarterly financial statements for the second quarter of 2010, as well as its books and records, accounted for the walnut cost at the adjusted estimate of 72 cents per pound.