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 KPMG has consequently resigned and withdrawn its endorsement of the financial-year reports in question.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None of the audit reports (albeit now withdrawn) “contained an adverse opinion or a disclaimer of opinion, nor was any such report qualified or modified as to uncertainty, audit scope or accounting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

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

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!