Herbalife Unlikely to Get Auditor Before Investor MeetingDuane D. Stanford and Chris Burritt
Herbalife Ltd. said it isn’t likely to hire an outside auditor before it holds its annual shareholder meeting next week, to replace KPMG LLP which resigned after saying a partner leaked inside information.
A shareholder vote to approve a new auditor isn’t required by the company’s charter or laws in the Cayman Islands, where Herbalife is based, Barb Henderson, a company spokeswoman, said in an e-mail yesterday. In addition, the New York Stock Exchange, where Herbalife is listed, has not given the company a time frame to hire an auditor, Henderson said.
“The audit committee is in the process of searching expeditiously for a new outside auditor and the company is in regular communication with the NYSE regarding the status of this matter,” she said.
The maker of weight-loss shakes, meal-replacement bars and cosmetics is fighting accusations by Bill Ackman, founder of New York hedge fund Pershing Square Capital Management LP, that it uses inflated pricing, misleading sales information and a complicated incentive structure to hide a pyramid scheme. The company has repeatedly denied the assertions, saying it is retail-oriented and sells products with unique ingredients.
Herbalife said April 9 that KPMG notified the company that its independence had been impaired, giving the firm no option other than to withdraw its audit reports for 2010, 2011 and 2012. The company said KPMG’s reports for those years fairly present its financial condition and results of operations.
KPMG fired Scott London, the head of its Los Angeles audit practice, who was later charged by federal prosecutors with insider trading related to tips passed to a friend about Herbalife and Skechers USA Inc., a footwear maker based in Manhattan Beach, California.
While shareholder approval of an outside auditor isn’t required, Herbalife voluntarily asks shareholders to ratify the selection, Henderson said. The company holds its meeting on April 25.
“It is currently anticipated the company will submit to its shareholders at its 2014 annual meeting the ratification of the company’s then outside auditor,” she said.
Shares of Herbalife, with a main office in Los Angeles, declined 0.4 percent to $35.14 at the close in New York. The shares have advanced 6.7 percent this year, compared with an 8.1 percent gain for the Standard & Poor’s 500 Index.