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Ex-KPMG executive tied to insider trading

Suspect may have leaked data on Calif. firms

The former KPMG senior executive, Scott I. London, is suspected of leaking secret information on Herbalife Ltd. and Skechers USA to a stock trader.

Richard Drew/Associated Press

The former KPMG senior executive, Scott I. London, is suspected of leaking secret information on Herbalife Ltd. and Skechers USA to a stock trader.

NEW YORK — Federal authorities in Los Angeles are investigating a former senior executive at KPMG on suspicion of leaking secret information to a stock trader, according to people with direct knowledge of the inquiry.

Scott I. London, the partner in charge of the audit practice for KPMG in Southern California, was fired by his employer because of the suspected passing of confidential data to an unnamed individual, a person briefed on the matter said.

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The case involves alleged tips about confidential data related to Herbalife, the seller of nutritional supplements, and Skechers USA, the footwear maker, according to these people. On Tuesday morning, Herbalife and Skechers said that KPMG had resigned as their auditor.

Both the US attorney’s office in Los Angeles and the Securities and Exchange Commission’s outpost there are investigating the case, people briefed on the matter said.

Skechers added that, according to KPMG, the former partner in question — London — was cooperating with authorities. London, 50, could not immediately be reached for comment. He worked at KPMG for 29 years, according to a profile on LinkedIn. A resident of Agoura Hills, Calif., London is chairman of the L.A. Sports Council and sits on the board of directors of the Los Angeles Area Chamber of Commerce.

The news of possible insider trading emerged in an unusual fashion late Monday, when KPMG said on its website that it had fired a senior partner in its Los Angeles office because of the suspected passing of confidential information to an unnamed individual ‘‘who then used that information in stock trades involving several West Coast companies.’’

The firm said it had to resign as auditor from several companies ‘‘after concluding today that the firm’s independence has been impacted’’ because of the partner’s behavior.

A government action against the former KPMG partner would add to the recent push by prosecutors and securities regulators to root out insider trading.

The news added to a swirl of publicity surrounding Herbalife, a supplement seller that has been in the middle of a well-publicized battle involving several hedge fund managers. William A. Ackman of Pershing Square Capital Management has said that he believes Herbalife is a ‘‘pyramid scheme,’’ and he has a $1 billion bet in place that the price of the stock will drop. On the other side of the trade is activist investor Carl C. Icahn, who owns a large position in Herbalife shares.

Herbalife, based in Los Angeles, said that KPMG had informed the company Monday afternoon it was resigning as auditor because its independence had been impaired.

In its announcement, Herbalife said it believed its financial accounts for its last three fiscal years remained accurate. But KPMG, citing concerns about its independence, withdrew its audits for those years. KPMG also said that its resignation was in no way related to Herbalife’s ‘‘financial statements, its accounting practices, the integrity of Herbalife’s management or for any other reason.’’

David Weinberg, Skechers’ chief financial officer, said in a statement that he believed none of the company’s audited filings misstated its results or financial condition. Still, KPMG was withdrawing its audit reports for the company’s last two fiscal years.

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