In an early delivery on the promise to crack down on accounting fraud in 2014, the Securities and Exchange Commission has charged Diamond Foods and two former executives with manipulating supplier costs to manage and beat earnings targets.

The SEC says that former CFO Steven Neil directed an effort to falsify the cost of walnuts, which spiked in 2010, to prevent the sharp increase from harming earnings. In a complaint filed in federal court in San Francisco, where Diamond Foods is based, the SEC says Neil sought to underreport what was actually paid to walnut growers by recording payments into later fiscal periods, thus inflating earnings.

The company reported higher net income and exceeded analyst estimates for quarters in 2010 and 2011 as a result of the manipulation, according to the complaint. Diamond restated its results in November 2012 to reflect true costs, and the company's stock price fell from a high of $90 a share in 2011 to $17 a share after the restatement. The company agreed to pay $5 million to settle the charges.

The SEC says Neil was facing pressure to meet or exceed Wall Street estimates just as growers of walnuts, which represented the company's largest commodity cost, demanded more to maintain longstanding relationships. To manage earnings, the SEC says Neil orchestrated a payment plan that improperly excluded portions of payments from year-end financial results. Neil is accused of characterizing the payments as advances on crops that had not yet been delivered to disguise the payments for crops already delivered. After the second quarter of 2010, the company claimed it had achieved 12 consecutive quarters of outperformance.

In a separate proceeding, the SEC says former CEO Michael Mendes should have recognized the scheme and that he omitted facts in certain representations to external auditors. Mendes agreed to pay a penalty of $125,000 without admitting or denying the charges. The SEC says he has already returned or forfeited more than $4 million in bonuses and other benefits he received under the fraudulent plan.

“Diamond Foods misled investors on Main Street to believe that the company was consistently beating earnings estimates on Wall Street,” said SEC director Jina L. Choi, in a statement. “Corporate officers cannot manipulate fiscal numbers to create a false impression of consistent earnings growth.”

SEC Chairman Mary Jo White, a former federal prosecutor, promised the SEC would emerge from a crush of rule-making activity under Dodd-Frank to increase its focus on enforcement. The regulator has been criticized in recent years for paying too little attention to accounting fraud.

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