Audit of Sun Maid Confirms Overpayments
An investigation has confirmed that California walnut and raisin growers received $43 million in overpayments through falsified records and inflated profits, a spokesman for the Sun Maid Growers cooperative said Friday.
But personal responsibility for the overpayments has yet to be pinpointed, spokesman R. William Winkler said in an interview.
“We’re still progressing on this audit,” Winkler said. “We’ll have it wrapped up about the first of the month.”
A related investigation into fraud probably will not be completed until the end of February, he added.
Revelation by Light
The giant cooperative last month called in two outside accounting firms--Touche Ross & Co. in San Francisco and Tuttle & Taylor of Los Angeles--after the overpayments were first made public by former President and Chief Executive Frank R. Light. Light, who had previously announced his intention to step down last Dec. 31, abruptly submitted his resignation to a specially convened meeting of the cooperative’s board of directors, which immediately accepted it.
Light helped create Stockton-based Sun Diamond in 1980 by merging the farmer-owned Diamond Walnut, Sun-Maid and Sunsweet Growers cooperatives, along with Valley Fig Growers and Hazelnut Growers of Oregon. Sun Diamond reported net sales of $487 million last year, down from a high of $522 million in 1983 and $517 million in 1984.
William Allewelt Jr., retired president of Tri/Valley Growers, was brought in temporarily to serve as president until a permanent successor to Light is found.
Allewelt told the Stockton Record that the audits so far have confirmed the overpayments, and he attributed them to a weak accounting system that shielded falsified records and inflated profits.
Financial reports from controllers in the cooperative’s Diamond Walnut and Sun-Maid raisin divisions went unquestioned in a practice that could go back eight years, he said.
At Least $12 Million
Sun-Diamond’s directors met Wednesday but failed to decide how to recover the overpayments from growers who received them, Winkler said.
Diamond Walnut’s shelling department managers overvalued 10,000 tons of partially processed walnuts and shells by at least $12 million, Allewelt said. “Circumstantial evidence” has linked falsified walnut records to a bonus program that rewarded managers for meeting production quotas, he said.
“We have reason to believe, with respect to falsifying records, that someone did willfully falsify records,” he said. Although Allewelt was quoted by the Record as having pinpointed some responsibility for falsified records on Fred D. Allen Jr., who resigned as Sun Maid’s controller last November, he later publicly retracted the allegation.
Allen denied that his departure, which preceded disclosure of the financial scandal by several weeks, had anything to do with the overpayments.
The discovery of the financial discrepancy apparently occurred last August when former Diamond Walnut controller Bill Jensen discovered that he had made a mathematical mistake that masked $4.7 million in overstated profits. That revelation led to an internal audit that revealed even greater overpayments.
