Herbalife's KPMG Auditor Was a Cheerleader, Too

Jonathan Weil joined Bloomberg News as a columnist in 2007, and his columns on finance and accounting won Best in the Business awards from the Society of American Business Editors and Writers in 2009 and 2010.
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The cat's out of the bag: The name of the recently fired KPMG LLP partner who was responsible for the firm's audits of Herbalife Ltd. and Skechers U.S.A. Inc. is Scott London.

He also has an interesting side gig: Chairman of the Los Angeles Sports Council. The nonprofit describes its mission as "the promotion of spectator sports programs in the Los Angeles and Orange County area, including support of our local teams and the attraction of events to the area."

Here's where that connection gets curious. Look on the left-hand column of the sports council's website, under the heading "Supporting Our Local Teams," and you'll see a list of logos and names, including Major League Soccer's Los Angeles Galaxy. And what's the first thing you notice when you click on the Galaxy? Herbalife and its logo are all over the team's website, including across the front of the Galaxy players' jerseys. That's because Herbalife, which sells nutritional supplements, is the team's main sponsor.

(The Galaxy won its second straight league championship last season in David Beckham's final year with squad.)

Herbalife and Skechers today said KPMG resigned and withdrew its audit reports for prior years. Herbalife said KPMG "had concluded it was not independent." Yesterday, without identifying London by name, KPMG said the partner in charge of its Los Angeles office's audit practice "was involved in providing non-public client information to a third party, who then used that information in stock trades involving several west coast companies."

Yet perhaps there was another reason for investors to wonder about KPMG's independence from Herbalife, or at least the appearance thereof: London is chairman of an organization that, quite literally, is a cheerleader for a professional sports franchise that is inseparable from Herbalife and its brand.

Anyone doing a Google search could have discovered this much sooner if the U.S. had mandatory disclosure of the names of audit partners and the companies they're in charge of auditing. But for now, audit partners' names themselves are inside information, because the Public Company Accounting Oversight Board refuses to end the ridiculous secrecy. This must change.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Jonathan Weil at jweil16@bloomberg.net