Today's Wall Street Journal reported that Herbalife Ltd. (NASDAQ: HLF) President and COO Gregory Probert had lied on his resume and does not hold the MBA that filings with the SEC claim he does.
The stock is down more than 8%, but Goldman Sachs analyst Simeon Gutman says that the credentials flap has ""has no fundamental implications" but that it "may just take some time for management credibility to be restored."
There are a couple of problems with this analysis. First of all, issues of management integrity absolutely do have fundamental implications, because they raise questions about what you can trust. Was Probert's MBA the only false statement in the company's SEC filings? Probert knew the company's filings contained an untrue statement, so we know that at least one member of Herbalife's senior management is OK with making false statements to investors.
Investors who lost money in Enron and Worldcom would probably be surprised that dishonest management has "no fundamental implications." Warren Buffett has often said that when looking at potential investments, the most important factor is "honest management." Something tells me he knows more about management that Mr. Gutman.
Herbalife President's lack of integrity has 'no fundamental implications'?
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