Furthermore, the DOJ and the SEC alleged that Herbalife failed to detect and prevent its subsidiary from making improper payment to Chinese officials and falsifying its expense report. Its executives allegedly received reports regarding its Chinese subsidiary’s high spending on entertainment and travel as well as its violation of Herbalife’s internal FCPA policies.
Moreover, the regulators alleged that Herbalife inaccurately logged in its books and records the improper payments and benefits as well as the false expense report submitted by its Chinese subsidiary.
Finally, Herbalife allegedly failed to create and maintain a sufficient internal accounting control system.
In a statement, SEC New York Regional Office Senior Associate Director Sanjay Wadhwa said, “Herbalife’s inadequate internal accounting controls allowed an environment of corruption to exist in its Chinese subsidiaries for more than a decade.”
On the other hand, DO Criminal Division Acting Assistant Attorney General Brian Rabbit commented, “By engaging in a decade-long scheme to falsify its books and records to conceal corrupt and other improper payments to Chinese officials and state-owned entities, Herbalife misrepresented important information made available to investors.”
Details of the settlement between Herbalife, DOJ, and the SEC
According to the SEC Order, Herbalife submitted a settlement offer in anticipation of the Commission’s administrative proceeding against it.
