KPMG has withdrawn as auditor of Herbalife and Skechers USA after the accounting firm revealed that one of its partners may have sold inside information on the companies to a third-party stock trader.
Nutrient-supplement seller Herbalife briefly halted activity in its shares after the revelation, only reopening trading Tuesday afternoon. The company's stock was down 21 cents at $38.18 Tuesday. The broader market was mixed.
Both Herbalife and footwear maker Skechers said there was no reason to believe that their financial statements had been materially misstated.
According to The New York Times:
"The news of possible insider trading emerged in an unusual fashion late Monday, when KPMG announced on its Web site that it had fired a senior partner in its Los Angeles office because of the suspected passing of confidential information to an unnamed individual 'who then used that information in stock trades involving several West Coast companies.'
"The firm said it had to resign as auditor from several companies 'after concluding today that the firm's independence has been impacted' because of the partner's behavior. It added that the partner acted 'with deliberate disregard for KPMG's long-standing culture of professionalism and integrity.' "
As The Associated Press reports:
"The development comes at an awkward time for Herbalife. Hedge fund mogul Bill Ackman has publicly accused of it distorting its financial information. Herbalife has shot back, saying Ackman just wants to push the stock down for his own profit. Ackman has bet the stock would fall."
In a statement on Tuesday, Skechers said upon the KPMG partner's resignation, the company "was informed by KPMG that KPMG's lead Audit Engagement Partner on the Skechers account is under federal investigation for providing non-public information of his clients to a third party in exchange for money. The third party then used that information to trade stocks of several West Coast companies."