Ousted KPMG Auditor for Herbalife, Skechers Has Been Identified

Tuesday, 9 Apr 2013 | 12:44 PM ET
Patrick Fallon | Bloomberg | Getty Images

KPMG was forced to resign as auditor for Herbalife and Skechers, both companies announced on Tuesday after a senior partner named Scott London was discovered to be at the center of an insider trading probe and was fired by the accounting firm, a source familiar with the matter told CNBC.

In separate statements, Herbalife and Skechers acknowledged that KPMG had resigned as their auditor. The shares of both companies were halted during early trading, with speculation rife about the nature of the move.

In a statement, KPMG confirmed that it was resigning from two clients but did not name either one.

The accounting giant said that a senior partner based in Los Angeles provided inside information to an unnamed individual, who then used it to engage in stock trades of key companies on the West Coast. According to the firm, the partner acted "with deliberate disregard for KPMG's long-standing culture of professionalism and integrity."

Skechers CFO: Would Have Never Suspected
CNBC's Kayla Tausche spoke with Skechers CFO Dave Weinberg, who said it had been disclosed that a senior audit partner had admitted to selling the company's nonpublic information. The auditor, Scott London, is cooperating with the Feds and no one else is under questioning.

Herbalife and Skechers said in statements that KPMG found no problem with their company's financial statements and was resigning only because the auditor saw its independence as impaired.

Initially, Herbalife drew most of the attention, as market watchers speculated the withdrawal might be connected to a roiling controversy over that company's business model.

For months, the nutritional supplement company has been at the center of a high-profile fight between two hedge fund titans, dubbed "the battle of the billionaires" by Wall Street watchers. Hedge fund manager Bill Ackman has publicly attacked Herbalife as a "pyramid scheme," while placing a $1 billion bet against its stock.

Meanwhile, activist financier Carl Icahn has championed Herbalife, buying its shares while pushing back forcefully against Ackman's claims.

Skechers' stock rose 2.6 percent after the halt was lifted, while Herbalife shares fell modestly.

-- CNBC's Scott Wapner contributed to this article.

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