Herbalife Ltd. (HLF): KPMG Kerfuffle KOs This Stock

Herbalife Ltd. (NYSE:HLF) shares are in freefall today — once again, through no fault of its own.

Herbalife Ltd. (NYSE:HLF)

In months past, the stock has come under continual attack from famed hedge-fund manager Bill Ackman, who has publicly shorted the stock and even accused the multilevel marketer of operating a pyramid scheme. Today, however, the culprit is different: Herbalife Ltd. (NYSE:HLF)’s own auditor is behind the collapse of the stock, which is down 3.6% with an hour left in trading.

So what happened to Herbalife?

In a nutshell, the story goes like this. Last week, the company’s auditor, KPMG, announced that it had fired a partner in its Los Angeles office who had apparently been feeding confidential information on the company to a third party, which was trading Herbalife Ltd. (NYSE:HLF) stock.

This morning, Herbalife announced that as a result of these actions by the partner in question, KPMG has notified Herbalife that it’s resigning as the Herbalife’s auditor. KPMG says this employee may have compromised Herbalife Ltd. (NYSE:HLF)’s fiscal-year 2010, 2011, and 2012 audit reports, which can therefore no longer be considered “independent.” KPMG has consequently resigned and withdrawn its endorsement of the financial-year reports in question.

For its part, Herbalife is attempting damage control, emphasizing that:

KPMG’s resignation is “solely due to the impairment of KPMG’s independence resulting from its now former partner’s alleged unlawful activities.”

“Herbalife Ltd. (NYSE:HLF)’s financial statements, its accounting practices, [and] the integrity of Herbalife’s management” have not been impugned.

None of the audit reports (albeit now withdrawn) “contained an adverse opinion or a disclaimer of opinion, nor was any such report qualified or modified as to uncertainty, audit scope or accounting principles.”

There were never any “disagreements with KPMG on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures.”

As such, Herbalife Ltd. (NYSE:HLF) says it stands by the accuracy of the reports, even if KPMG no longer does, averring that “the Company’s financial statements covering the referenced periods fairly present, in all material respects, the financial condition and results of operations of the Company as of the end of and for the referenced periods.”

Investors, now beginning to absorb the import of the news, are beginning to rethink the sell-off. The stock has slowly been recovering some of its losses this afternoon.

The article KPMG Kerfuffle KOs Herbalife Stock originally appeared on Fool.com and is written by Rich Smith.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool has the following options: Long Jan 2014 $50 Calls on Herbalife Ltd. (NYSE:HLF).

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!