Shares of Herbalife Ltd. (NYSE: HLF) were halted this morning pending a news release. When the news actually hit — The New York Times DealBook blog reported it first — it took everyone by surprise: KPMG will have to resign as the company’s auditing firm.
The first reaction was that William Ackman and his hedge fund, Pershing Square Capital Management, had managed to pull a rabbit out of the hat. Ackman has accused Herbalife of being a pyramid scheme and taken a massive short position in the nutritional foods company. While no official investigation has been started, the general feeling is that any shadow cast over Herbalife and its multilevel marketing business could sink the shares like a stone.
In a press release yesterday, KPMG said it had immediately fired a senior partner “for providing non-public information to a third party, who then used that information in stock trades involving several West Coast companies.” Herbalife is based in Los Angeles.
KPMG said it was resigning from 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.”
Herbalife shares closed at $39.39 last night, in a 52-week range of $24.24 to $73.00. As of 10:25 a.m. ET, shares are still halted.
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