After an exhaustive six-week long search, during which time it went without audited financial statements, nutritional supplements company and alleged pyramid scheme Herbalife has picked one of the three remaining options for the job. Read more »
California Jeweler Who Traded A Rolex, Unmarked Envelopes Of Cash For Inside Information Re: Herbalife, Skechers In Pretty Good Spirits For Someone Who Just Plead Guilty To Felony ChargesBy Bess Levin
Which may or may not have something to do with someone hitting the jackpot this weekend/having big money riding on June’s Belmont Stakes. Come on Itsmyluckyday, daddy needs a new source of income/money to cover up to $250,000 in fines! Read more »
California Jeweler Is Sorry He Traded A Rolex, Unmarked Envelopes Of Cash For Inside Information Re: Herbalife, SkechersBy Bess Levin
Won’t happen again. Read more »
KPMG Is Going To Look Into Whether Or Not It Needs To Do A Better Job Stressing Company Policy That Frowns On Sharing Material Non-Public Information About Clients With One’s Golf BuddiesBy Bess Levin
KPMG Partner Assured Coconspirator Who Handed Him Bags Of Cash In Parking Lots That Insider Trading Wasn’t Really IllegalBy Matt Levine
I don’t want to give you legal advice, but on the other hand you could be getting it from a worse source. Scott London for instance:
[Insider trader Bryan] Shaw said that in approximately July 2012, he received a notice from Fidelity Brokerage Services that Fidelity was putting a hold on his investment account. Shaw said that he immediately called LONDON and expressed his concern that their insider trading had been discovered. Shaw said that LONDON reassured him that there was no reason for concern, and explained that insider trading was like counting cards at a casino in Las Vegas – if you were caught, they simply ask you to leave because they cannot prove it.
Oops! Six months later the FBI got to Shaw, inducing him to cooperate to save himself, and today they charged London with criminal insider trading.1 It’s tempting to conclude that the moral of this story is “never take legal advice from an accountant,” though realistically it’s more like “never take legal advice from your criminal co-conspirator.”
This case is very weird. I mean the actual case is pretty boring: London, as a KPMG audit partner on a bunch of West Coast accounts, got earnings information before it became public, and then he gave it to Shaw, and then Shaw bought stock and options and made money on it and then literally delivered literal bags filled with literal cash to London to thank him for the tips. After Shaw started cooperating he met with London, wearing a wire, and this happened:
In advance of the meeting, agents from the FBI provided Shaw with $5,000 in cash, which was placed into a manila envelope and then wrapped inside a black paper bag, which was consistent with how Shaw had described his concealing previous cash payments he had made to LONDON.
Oh you put the cash in an envelope inside a bag? They’ll never catch you! Read more »
Guy Trades Dream Of Making Millions Selling Herbalife For New Dream Of Making Millions Suing HerbalifeBy Matt Levine
It’s a little surprising that it took this long for someone to sue Herbalife, isn’t it? Whether or not Bill Ackman is right about Herbalife being an illegal pyramid scheme, he did take the trouble of writing like 300 pages about it, which is usually more than enough to inspire some intrepid class action lawyer to cut and paste the most damaging claims into a complaint and see where it goes. Perhaps they were stymied by converting from PowerPoint. Anyway here you go:
California resident Dana Bostick is suing Herbalife under racketeering and corruption laws, accusing the company of being an “inherently fraudulent pyramid scheme.” …
While Herbalife has settled suits brought by former distributors in the past, Bostick is the first to go to court since Herbalife became a battleground of hedge fund titans. Ackman has faced off against Dan Loeb and Carl Icahn, who owns a 15 percent stake in Herbalife. … The suit, which also seeks class-action status, claims around 88 percent of Herbalife’s 500,000 US distributors do not make any money.
The complaint is here and it’s … mostly it’s just sad. On a first reading it’s not entirely clear how you should apportion blame for the sadness; I don’t know if this says more about Herbalife or Dana Bostick: Read more »
the moral of the story
‘You Can Still Lose Money Trading On Material Non-Public Information’ Is Biggest Takeaway From KPMG Scandal, Posits Lawyer Representing Guy Doing The TippingBy Bess Levin
Scott London’s path from KPMG LLP partner to subject of insider-trading investigations began with a casual conversation in 2010 with “someone I’d known from the golf club, ” he said in an interview. Mr. London said the discussions—which began after he had spent a quarter of a century at KPMG—concerned corporate audit clients Herbalife Ltd. and Skechers USA Inc. It wasn’t until the second or third chat that he realized that his unidentified friend was trading on the information, he said…In late March, Mr. London said he was contacted by the Federal Bureau of Investigation, at which point he hired a lawyer, Harland W. Braun…Mr. Braun said his client hadn’t reached a deal with prosecutors or the SEC to settle any allegations that may result from their investigations. Mr. Braun said the friend’s brokerage had frozen his trading account, adding that some of these trades had lost money. “It just shows how dangerous casual tips can be,” Mr. Braun said. [WSJ]
CAN YOU FEEL THE EXCITEMENT? No, right? Okay good. A senior audit partner at KPMG Los Angeles did a bad thing and “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.” And now KPMG has resigned as the auditor of a couple of companies, and withdrawn their 2010/2011/2012 audit reports, which, given that 10Qs are due in a couple of weeks, is a bummer for those companies. Bob’s Auditing Service & Carwash of Rancho Palos Verdes is going to be busy.
And of course one of the companies is Herbalife, which has really had more than its share of excitement. Honestly if I was insider trading I’d probably pick a company a bit further from the limelight?1 Anyway HLF was halted for most of the morning while while they puttered around thinking things over, only to eventually release a pretty bland press release that stresses that KPMG resigned “solely due to the impairment of KPMG’s independence resulting from its now former partner’s alleged unlawful activities 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.” It eventually re-opened down 2.3%.
The other company is … currently a player to be named later? Speculation is focusing on Skechers, a California-based KPMG client that was also halted, which seems plausible enough. Who knows? [Update: Yep, Skechers.]
Okay further baseless speculation! Read more »
Guy Who’s Short Herbalife Says Guy Who’s Long Herbalife Saying Guy Who’s Short Herbalife Saying Herbalife Is A Fraud Is A Fraud Is A FraudBy Matt Levine
One day Herbalife will either be put out of business by consumer-protection regulators or it won’t. If it is then Bill Ackman will make a lot of money and Carl Icahn will lose a lot of money, and if it isn’t Ackman will lose a lot of money and Icahn will make a lot of money, and in the meantime everyone will shout that everybody else should be investigated.
That’s proceeding apace. Ackman yesterday:
In a statement late Tuesday, Pershing Square Capital Management’s Ackman said that he was pleased that the NCL was requesting an FTC investigation and believes it will show that the company is a pyramid scheme.
We regret that the National Consumers League has permitted itself to be the mechanism by which Pershing Square continues its attack on Herbalife. If anything, it is Pershing Square that should be investigated by appropriate authorities. Its actions are motivated by a reckless $1 billion bet against the company based on knowingly false statements about Herbalife.
Now Herbalife may or may not be a pyramid scheme but I’ve always thought that demands to investigate short sellers are unfair and one-sided. People who say mean things about stocks they’re short are always accused of manipulation. People who say nice things about stocks they’re long – which happens all the time – are rarely accused of market manipulation.1
Bill Ackman And David Einhorn’s Love Blossomed On A Subway Platform But Now They Might Not Even Give Up Their Seat If The Other One Was PregnantBy Bess Levin
Henry Winkler once said, “Assumptions are the termites of relationships.”1 In 2011, Bill Ackman assumed it was okay to talk to The New York Times about David Einhorn’s business and, like a homeowner forced to move out for three days while a pest control company sprays the place, he’s been forced to pay. Big time. Read more »