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United States. Securities and Exchange Commission

Herbalife Nutrition Ltd. Faces Securities Lawsuit Amid FCPA Settlement

Strategic Insights

— 1 min read

Herbalife Nutrition Ltd. has made headlines in recent weeks following its settlement with the U.S. Securities and Exchange Commission (SEC) and Department of Justice (DOJ) over alleged Foreign Corrupt Practices Act (FCPA) violations in its China operations. The Company reached an agreement with the SEC and DOJ, which included a deferred prosecution agreement (DPA) and a payment of approximately $123 million in aggregate penalties, disgorgement, and prejudgment interest. Herbalife's stock price fell significantly in the aftermath of the settlement, causing concern among investors.

Key Takeaways:

  • Herbalife Nutrition Ltd. (HLF) filed a quarterly report with the SEC on May 7, 2020, which disclosed the Company's agreement to resolve bribery investigations by the SEC and DOJ.
  • The agreement included an administrative resolution with the SEC, a DPA with the DOJ, and a payment of approximately $123 million in penalties, disgorgement, and prejudgment interest.
  • Herbalife's stock price fell by over 20% in the days following the announcement, closing at $39.62 per share on May 11, 2020.
  • The SEC accepted the Offer of Settlement and issued an administrative order finding that the Company violated the books and records and internal controls provisions of the FCPA on August 28, 2020.
  • The Company and DOJ entered into a court-approved DPA under which the DOJ deferred criminal prosecution of Herbalife for a period of three years.
  • Herbalife agreed to undertake compliance self-reporting obligations and pay the SEC and DOJ aggregate penalties, disgorgement, and prejudgment interest of approximately $123 million.
  • The Company's stock price fell significantly during intraday trading on August 28, 2020, following the SEC's acceptance of the settlement.

Statistics:

  • $41.96 - Herbalife's stock price on August 28, 2020, before the settlement announcement.
  • $38.21 - Herbalife's stock price at the close of trading on August 28, 2020, after the settlement announcement.
  • $39.62 - Herbalife's stock price at the close of trading on May 11, 2020, following the initial announcement.
  • 20% - Decline in Herbalife's stock price in the days following the initial announcement on May 7, 2020.

Sources:

  • Newsfile Corp.
  • Herbalife Nutrition Ltd. Quarterly Report (Form 10-Q) for the first quarter of 2020, filed with the U.S. Securities and Exchange Commission on May 7, 2020.
  • Administrative Order and Offer of Settlement by the U.S. Securities and Exchange Commission, dated August 28, 2020.
  • Deferred Prosecution Agreement between Herbalife Nutrition Ltd. and the U.S. Department of Justice, dated August 28, 2020.

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