Herbalife Ltd. (HLF:US) Director Jeff Dunn said he expects a “clean read” when PricewaterhouseCoopers LP finishes new audits of the company’s books amid allegations by hedge fund manager Bill Ackman that it’s a pyramid scheme.
The nutrition company hired PricewaterhouseCoopers in May after its previous accounting firm, KPMG LLP, resigned because of alleged insider trading by an auditor. PricewaterhouseCoopers is re-auditing statements for 2010 through 2012. In August, Ackman sent a 52-page letter urging the auditor to pay attention to “serious accounting and disclosure issues.”
Dunn, who runs Campbell Soup Co.-owned Wm. Bolthouse Farms Inc. and is a former Coca-Cola Co. (KO:US) president, reiterated that the audits are expected to be completed by the end of December. He also said he’s open to using excess cash to buy back Herbalife shares when the audits are finished.
“I have nothing that suggests anything’s going to come out of the audit,” Dunn said yesterday in a telephone interview. “We view it as an opportunity because now you have a full, clean set of eyes coming in and tearing it apart one more time.”
Herbalife and Ackman didn’t immediately respond to requests for comment.
Ackman, whose Pershing Square Capital Management LP has sold short Herbalife shares, has accused the Cayman Islands-based company of swindling unsophisticated consumers with false get-rich promises using overpriced products. He has urged U.S. regulators, elected officials and community activists to help shut it down. Herbalife has repeatedly denied Ackman’s allegations.
A clean bill of health on the new audits may clear the way for Herbalife to resume plans to repurchase at least $50 million of stock per quarter, the company said in July.
“Our stock’s a good buy and if we have excess cash laying around and we have leverage, that’s a great way to put our money to work,” Dunn said. “It’s good for the shareholders.”
Herbalife fell 1.2 percent to $63.92 at the close in New York. The shares have almost doubled this year.
Chief Executive Officer Michael Johnson has the board’s full support, Dunn said, adding that Ackman hasn’t gotten traction for his allegations.
“I wouldn’t be on this board if I had any questions about our legal, ethical, moral stance,” he said. “Notwithstanding Ackman’s tirades, there is no data to suggest that we’re not in full compliance.”
Herbalife said April 9 that KPMG notified the company that its independence had been impaired, giving the firm no option other than to withdraw its audit reports for 2010, 2011 and 2012. The company said KPMG’s reports for those years fairly present its financial condition and results of operations.
KPMG fired Scott London, the head of its Los Angeles audit practice, who was later charged by federal prosecutors with insider trading related to tips passed to a friend about Herbalife and Skechers USA Inc.
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