Herbalife says KPMG 'concluded it was not independent' as auditor

KPMG has resigned as Herbalife's auditor after the auditing firm fired a senior partner in its Los Angeles office because of an alleged insider-trading scheme.

"KPMG stated it had concluded it was not independent because of alleged insider trading in Herbalife's securities by one of KPMG's former partners," said Herbalife, the L.A.-based maker and distributor of nutritional foods and supplements.


Herbalife said the former KPMG senior partner was the auditing firm's "engagement partner" on the company's audit.

In its statement, Herbalife noted KPMG resigned solely because KPMG's independence was compromised and "not for any reason related to Herbalife's financial statements, its accounting practices, the integrity of Herbalife's management or for any other reason."

Herbalife has been at the center of a bitter tug of war on Wall Street, as major activist investors -- including Bill Ackman and Carl Icahn -- have lined up on either side of the company.

Ackman last year called Herbalife a pyramid scheme, and announced he would short, or bet against, the company's stock until it hit zero.

Herbalife said KPMG resigned effective Monday. The company said it would withdraw its proposal to reappoint KPMG as its independent accountant.

KPMG said the now-former senior partner was in charge of the firm's auditing practice in its Los Angeles office.

Trading in Herbalife shares had been halted Tuesday morning, apparently pending news of the announcement. When they reopened for trading, Herbalife's stock lost 41 cents, or 1.1%, to $37.98.

[For the Record, 10:08 a.m. PDT April 9: An earlier version of this online post said the KPMG senior partner who resigned also oversaw auditing in the Pacific Northwest. In fact, the auditor's duties were focused on the company's Los Angeles business unit.]