News Column

Herbalife Picks New Auditor After Insider Trading Issue

May 21, 2013

Stuart Pfeifer

Herbalife Ltd. has chosen PricewaterhouseCoopers as its independent auditor, ending a nearly two-month effort to replace KPMG, which resigned after a senior partner was accused of insider trading.

The Los Angeles nutritional products company said PricewaterhouseCoopers would "immediately" begin re-auditing financial statements for 2010, 2011 and 2012, which KPMG withdrew after it learned of the insider-trading allegations.

Herbalife shares jumped more than 4% after the company announced its decision.

Scott London, a longtime KPMG employee in Los Angeles, was fired in April after he was accused of passing stock tips on several KPMG clients to a friend who used the information to make more than $1 million in profitable stock trades.

Last month, London acknowledged to The Times that he passed inside information to his friend, Bryan Shaw, who pleaded guilty Monday to federal insider-trading charges. London also intends to plead guilty, his attorney said.

KPMG's resignation created a new headache for Herbalife, which has been fighting a hedge-fund manager's allegations that the company operates a pyramid scheme.

Without the audited financial statements, Herbalife scaled back plans to borrow money to repurchase shares of its stock. The lack of audited financial statements complicated its financing efforts.

In a statement, Herbalife said that KPMG's resignation was related solely to London's illegal conduct and "was not related to Herbalife's financial statements, its accounting practices [or] the integrity of Herbalife's management."

"We are very pleased to have engaged PwC to serve as the company's independent auditor. ... Investors should rest assured that the company will be working to assist PwC in any way necessary to facilitate their work," said Leroy Barnes, chairman of Herbalife's audit committee.


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Source: (c)2013 the Los Angeles Times Distributed by MCT Information Services


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