April 9, 2013 at 2:13 PM ET
KPMG was forced to resign as auditor for both Herbalife and Sketchers, both companies announced on Tuesday, after a senior partner at the center of an insider trading probe was fired by the accounting firm.
In separate statements, Herbalife and Sketchers 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 leaving two clients but did not mention either by name.
The accounting giant said that a senior partner based in Los Angeles provided inside information to an unnamed individual, who then used the information 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."
Herbalife and Sketchers said in a statement that KPMG found no problem with the company's financial statements, and was resigning only because the auditor viewed its independence as impaired.
Initially, it was Herbalife that drew most of the attention, as market watchers speculated the resignation might be connected to a roiling controversy over Herbalife'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.
The stock of Skechers rose by 2.6 percent after the halt was lifted, while Herbalife's shares fell modestly.
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