On April 8 KPMG LLP released a press statement saying they had
resigned effective immediately as the auditing firm for both
) and Skechers USA (
). This resignation came after the company found out that one of
its auditors was profiting from discussing nonpublic information
with investors in these companies.
KPMG LLP is one of the big four auditing firms in the US. It
provides tax, audit and advisory services for large corporations
as well as on the individual level.
While the name of the Herbalife audit has not been publicly
he Wall Street Journal claims that the KPMG partner was Scott
London, whose LinkedIn page says he has been with the firm for 29
The press release dated Monday, April 8, 2013 states:
Late last week, we were informed that the partner in charge
of KPMG's audit practice in our Los Angeles business unit was
involved in providing non-public client information to a third
party, who then used that information in stock trades involving
several West Coast companies. The partner was immediately
separated from the firm.
KPMG's 22,000 partners and employees unequivocally condemn
this individual's rogue actions. This individual violated the
firm's rigorous policies and protections, betrayed the trust of
clients as well as colleagues, and acted with deliberate
disregard for KPMG's long-standing culture of professionalism and
KPMG is resigning two clients after concluding today that the
firm's independence has been impacted as a result of this
individual's behavior, and we have informed those companies it is
necessary to withdraw our auditor reports. We have no reason to
believe that the financial statements of these companies have
been materially misstated.
We regret the impact this individual's actions may have had
on any of our clients. KPMG remains committed to the highest
standards of professionalism, integrity and quality, and we are
dedicated to the capital markets we serve.
Following this press release, Herbalife made a statement saying
that KPMG resigned "solely due to the impairment of KPMG's
independence resulting from its now former partner's alleged
unlawful activities, and not for any reason related to
Herbalife's financial statements, its accounting practices, the
integrity of Herbalife's management or any other reason."
Unfortunately for Herbalife, this insider trading scandal comes
at a bit of an uncomfortable time. Recently Guru
verbally attacked the company by saying that it was distorting
the financial information it gave investors.
Despite the fact that the company has not had any disagreements
with KPMG's audits from the beginning of the year through Monday,
Herbalife has withdrawn its audits for fiscal years 2010 through
"Such reports should no longer be relied upon as a result of
KPMG's lack of independence created by the circumstances
described above," Herbalife stated. Herbalife still maintains
that its audit committee and management "continue to believe that
its financial statements covering the referenced periods fairly
represent the affected fiscal years."
Herbalife has still not disclosed what the inside information
was. CNBC made the assumption that it might be the earnings data
for the first quarter that Herbalife is set to announce on April
In regards to Skechers,
announced a 5.1% stake in the company yesterday after close. So
now not only does SAC have to deal with its own insider trading
case that already cost it over $600 million, but it might just
have another one dumped in its lap.
Both the SEC and the FBI office in Los Angeles are investigating
the alleged insider trading involving the former KPMG
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