Skechers Stock Trading Halted Temporarily

Shares of Manhattan Beach-based Skechers USA stock briefly stopped trading Tuesday amid fallout from allegations of insider trading made by its auditing firm, KPMG.

Skechers stock was pulled from trading along with Herbalife shares, the two companies allegedly impacted by a KPMG partner who passed confidential information about them to an insider trader. The partner, said to be Scott London, acted as lead partner on the Skechers audit for roughly eight of the past 13 years, said David Weinberg, chief financial officer and chief operating officer at Skechers. 

According to USA Today, London is believed to have provided information, allegedly in exchange for money, about the companies to a third party that used the information to trade and make a profit. That third party reportedly was not a financial institution, a hedge fund or party that would have been able to exert a big influence on stock prices, according to a USA Today source not authorized to speak on the matter.

London was fired after KPMG was told of the matter last week, according to a report on Financial Times. KPMG has publicly stated that the firm has no reason to believe there were any problems with the financial reports of Skechers or Herbalife, according to a report on The Washington Post.

Herbalife shares did not open with the rest of the stock market Tuesday; Skechers shares opened as normal, however trading of them was halted later in the morning. Both stocks resumed their normal trading later the same morning.

Skechers shares closed up 1.9 percent for the day; Herbalife ended down 3.8 percent.

KPMG, one of the nation's largest auditing firms, stepped down Monday as auditor of Skechers and Herbalife, a Los Angeles nutritional supplement company.

The US attorney’s office in Los Angeles, the Federal Bureau of Investigation and the Securities and Exchange Commission are investigating the alleged passing of confidential client information, according to media reports.

Said Weinberg in an online statement, “KPMG has advised us that that they have no reason to believe that there were any misstatements in our financial statements, and we firmly believe that there has been no misstatements of our results or financial condition. Nonetheless, it is an unfortunate development at a time when we are preparing to release earnings for the First Quarter of 2013, a quarter which, like the Fourth Quarter of 2012, we believe will show significant growth and the continuing strength and viability of our business. We are working diligently to replace KPMG as quickly and efficiently as possible as we look forward to releasing positive results for the first quarter of 2013 later this month.”

In the Skechers statement, the company noted KPMG "resigned as Skechers’ 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 Skechers’ financial statements, its accounting practices, the integrity of Skechers' management or for any other reason."