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 KPMG has consequently resigned and withdrawn its endorsement of the financial-year reports in question.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None of the audit reports (albeit now withdrawn) “contained an adverse opinion or a disclaimer of opinion, nor was any such report qualified or modified as to uncertainty, audit scope or accounting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

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

The 10 Longest Wars of All Time

The 13 Worst Looking Foods that Taste Great

The 6 Most Gruesome Injuries Suffered During a Sports Match

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!