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Skechers USA Inc. CFO and COO David Weinberg described to Footwear News his moment of shock on Monday afternoon when he heard that an executive from the firm’s independent auditor, KPMG, had provided non-public information about the company to a third party, who then used the information in stock trades.
“[Someone from KPMG came down and] read us a prepared statement, and we just listened,” he said. “It was one of the most shocking lectures I’ve ever heard.”
Weinberg spoke to FN on Tuesday afternoon after Skechers confirmed the resignation of KPMG as its independent auditor amid an insider trading probe by the Securities & Exchange Commission, and the firing of a senior partner. After the call with Weinberg, several sources indentified the auditor as Scott London from KPMG’s West Coast practice.
Skechers’ stock had been halted for a little more than an hour on the New York Stock Exchange Tuesday morning, as news emerged that its shares, along with those of nutritional-supplement maker Herbalife Ltd., had possibly been traded illegally due to the leakage of non-public information from the KPMG partner to a third party in exchange for money.
KPMG has been Skechers’ independent auditor since the Manhattan Beach, Calif.-based firm was founded in 1992, Weinberg said. London, the partner-in-charge of KPMG’s audit practice in Southern California, oversaw audits of both Herbalife and Skechers, according to sources. According to London’s profile on LinkedIn.com, he has worked at KPMG since 1984, the year he graduated from California State University at Northridge with an accounting degree.
As Skechers’ CFO, Weinberg knew London well — or so he thought.
“I have all kinds of feelings, and I’m not even sure I can get through all of them yet. Betrayed is a good one because he’s put a lot of pressure on us through some personal things he’s done,” Weinberg told FN candidly. “I can’t imagine that the way our stock’s traded [he would’ve made] enough to put him on easy street for life. He did fairly well and didn’t seem to have an excessive lifestyle. We just know he did it because he admitted it. And now we have to react to it and move on.”
Weinberg said he did not know what information was leaked, or when, only that it was not for public consumption, for the purposes of trading in the stock for money. He also said it is unclear if any trades were actually executed, and if so, whether money was made off the trades.
For now, Skechers is focused on engaging a new independent accountant so it can get on with the business of announcing its first-quarter results. That announcement, originally slated to come in the next few weeks, will likely be delayed, according to Weinberg.
“Our business is going very well,” he said. “We’re very anxious to get this information out to the public.”
Skechers’ shares closed 1.9 percent higher at $21.91 on Tuesday. According to Yahoo Finance, the Street expects the firm to report first-quarter earnings of 19 cents a share, on revenue of $435.1 million, later this month.