Way too much time on their hands

According to CNBC, the DOJ and FBI are investigating Herbalife, an MLM company, so, knowing that, you’re already forewarned as an investor. The company’s auditor is PWC, which we’ve used and found to be straightforward and highly professional. And we’re also a decade removed from Enron and Arthur Andersen, so one presumes the toleration of shoddy accounting practices in controversial companies is not common in what were once the Big 8. Finally, storied investors are on all sides of the Herbalife trade.

We were introduced to cash flow and revenue recognition problems in the ancient case of Stirling Homex‘s bankruptcy, which featured something called “unbilled long-term receivables.” Points for creativity, Mr. Stirling! In the case of Herbalife, it would be very interesting to know the length of the cash cycle from product creation to payment by the final consumer of the product, not just one or two L’s in the MLM. (Herbalife’s auditor is a successor to that of Stirling Homex.) So there is plenty of history to such issues and plenty of real experts on the case; hence it seemed an odd use of time for additional federal employees. Then again. Hmmmm.

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