BULLETIN: KPMG Discloses Chicanery In Its ‘Los Angeles Business Unit’; Shares Of Herbalife Temporarily Halted; MLM Firm Says KPMG Told It That KPMG-Employed Auditor Was Engaging In ‘Insider Trading’ Of Herbalife Stock

Shares of MLM company  Herbalife were halted this morning after its auditor — KPMG — issued a statement yesterday that it was informed “late last week” that “the partner in charge of KPMG’s audit practice in our Los Angeles business unit 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.”

KPMG did not specifically mention Herbalife in its statement. Nor did the auditing firm say who informed it that its “partner in charge” was involved in chicanery. KPMG did, however, say that it had fired the partner and was “resigning” two clients.

The Wall Street Journal is reporting that Herbalife shares were “halted minutes after the opening bell due to news pending.”

Separately, the New York Times is reporting that Herbalife “is poised to disclose on Tuesday that KPMG will have to resign as the company’s auditor.”

That disclosure now has occurred — and trading in Herbalife shares has resumed.

Herbalife said this morning in a statement that KPMG wallked away from the company after stating “it had concluded it was not independent because of alleged insider trading in Herbalife’s securities by one of KPMG’s former partners.”

That former partner was the KPMG engagement partner on Herbalife’s audit until April 5, Herbalife said.

“KPMG advised the Company it resigned as Herbalife’s independent accountant 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,” Herbalife said.

Herbalife has been the subject of a battle between titans Carl Icahn, who is bullish on the company, and Bill Ackman, who claims Herbalife is a pyramid scheme. On its website, Herbalife denies it is either a pyramid scheme or a Ponzi scheme.