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Diamond Foods 2014
San Francisco-based Diamond Foods Inc, and two former top executives deceived investors, by lying about walnut costs to boost earnings. Diamond Foods former former Chief Financial Officer, Steven Neil, directed a scheme to under report how much money the company paid walnut growers by delaying the recording of the payments into later fiscal periods. Which allowed the company to report higher net income and beat the expectations of analysts for fiscal quarters 2010 and 2011. The CFO devised special payments to satisfy Diamond’s walnut growers and bring amounts paid to growers closer to market prices, but wrongly omitted parts of those payments from the year-end financial statements. Instead of correctly recording the costs on Diamond’s books, Neil told his finance team to record the payments as advances on crops that had not yet been delivered. Even though the payments were for prior crop deliveries, Diamond was able to manipulate walnut costs in its accounting to hit quarterly targets for earnings per share (EPS) and exceed estimates by analysts. (SEC 2014).
Carters Inc 2010
Carter’s Inc., the world’s biggest maker of children’s clothing Vice President, Joseph Elles persuaded customers such as Kohl’s to make huge unauthorized purchases of Carters clothing at unauthorized discounts, which were not disclosed. The hidden discounts, caused Carter’s to overstate profits Elles falsely manipulated the dollar amount of discounts that Carter's granted to its largest wholesale customer, to encourage Kohl’s to purchase greater quantities of Carter's clothing for resale. Elles then hid his wrongdoing by persuading the customer to wait to deduct the discounts from payments until future financial reporting periods. He also created and signed false documents to Carter's accounting department the timing and amount of those discounts.(SEC 2010).
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