KPMG, one of the Big Four accounting firms in America, immediately fired London and withdrew its services from Herbalife and Skechers upon hearing of the insider trading investigation. Along with its services, the company opted to withdraw its auditor reports dating back to 2010 for both companies.
While Bryan Shaw has not been charged with criminal actions by the FBI, both men have been charged in civil suits by the SEC. London has been charged with conspiracy to commit criminal securities fraud for giving illegal information to Shaw.
Over the past two years, London has been giving Shaw information and in return Shaw has been giving London gifts such as a $12,000 watch and pricey tickets to a Bruce Springsteen concert.
Federal authorities initiated an investigation after the brokerage firm Fidelity raised red flags about suspicious activity in Shaw’s account. Following this, investigators confronted Shaw with evidence of the apparent insider trading. At this point Shaw was forced to turn against his (now former) friend. Shaw became a government informant and recorded several conversations between London and himself.
The last straw occurred when London arranged a meet with Shaw to discuss happenings at Herbalife. London mentioned rumors of Herbalife going private and told Shaw that if this were to happen “that is going to be where you make a ton of money.”
FBI agents secretly took pictures of this meeting and Shaw handing London a bag containing $5,000 for the information. The agents arrested the former KPMG partner two weeks later in his Agoura Hills, Calif., home.
In total London gave Shaw nonpublic information on five different West Coast companies that KPMG worked with. This information led to Shaw making $1.27 million dollars.
In a press statement released on Tuesday, Scott London said, “I regret my actions in leaking nonpublic data to a third party. What I have done was wrong and against everything that I had believed in.”
And now Herbalife gets to clean up another controversy surrounding its name.
Herbalife is constantly in the middle of an argument amongst the Gurus. To view the complete list of gurus with a stake in HLF, look at Herbalife's Guru Trades page.
To view more articles on Herbalife, click here.
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