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Monday, Jun 5, 2023

Herbalife Shares Jump on Audit Results

Shares of Herbalife Ltd. rose more than 9 percent on Monday after the nutritional supplement company said a re-audit of more than three years of its financial results found no material changes to its earlier financial statements. The Los Angeles company ordered the audit after it was caught up in the KMPG insider trading scandal involving Agoura Hills resident Scott London and his golfing partner Bryan Shaw, an Encino jeweler KPMG resigned as Herbalife’s auditor in May after London, then a partner at its Los Angeles office, was accused of leaking insider information about the companies he covered, including Herbalife, to Shaw. Prosecutors said Shaw made more than $1.2 million trading on that information and kicked back gifts and money to London. Both men later pleaded guilty in the case, but have not yet been sentenced. Prosecutors are seeking a three-year prison term for London. “As previously publicly stated by KPMG, their resignation was not related to Herbalife’s financial statements, its accounting practices, the integrity of Herbalife’s management, or any other reason,” said Herbalife in the announcement. The new audit by PricewaterhouseCoopers doesn’t directly address Ponzi scheme charges leveled against the Herbalife by hedge fund trader William Ackman last December. But billionaire Carl Icahn, who has became a large Herbalife investor over the past year, said in TV interviews today that the results were another indication that Ackman’s accusations were baseless. Ackman’s New York firm, Pershing Square, said in an emailed response this afternoon, “It is not the role of Herbalife’s auditor to determine if the company is a pyramid scheme … Rather, that determination depends on whether distributors earn more from recruiting new distributors than from retail sales to consumers who are not distributors.” Shares closed up $6.47, or 9.5 percent, to $74.85 on the New York Stock Exchange.

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