The sudden departure of Rich Goudis, Herbalife Nutrition Ltd.’s chief executive, appears tied to comments he made about the company’s internal accounting policies, according to media reports.
Goudis resigned unexpectedly Jan. 8 for reasons that the company said were related to its “expense policies and business practices.”
Herbalife said Goudis voluntarily resigned. He had been with the company since 2004 and served as chief executive since June 2017.
The Wall Street Journal reported Thursday that Goudis may have stepped down related to comments recorded years ago while he was chief financial officer.
The newspaper said Goudis bypassed the company’s internal accounting policies by reportedly telling a colleague working in Hong Kong or mainland China to ignore the company’s expense-account limit on entertainment spending.
Herbalife declined Friday to comment on the media reports.
Following the report, Herbalife’s share price fell as much as 5.6 percent during trading Thursday before closing at $57.34. It rebounded slightly Friday to $58.24.
Several law firms that specialize in shareholders lawsuits have given notice since Thursday about requesting clients for a potential class-action lawsuit.
The company said Jan. 8 that Goudis’ resignation “is not due to any issues regarding the company’s financial reporting.”
Instead, the company said it “pertains to comments which recently came to light, made by Mr. Goudis prior to his role as chief executive, that are contrary to the company’s expense-related policies and business practices.”
“The comments made were inconsistent with Herbalife Nutrition’s standards and do not reflect the company’s culture,” the company said.
Herbalife has reported for several quarters that the U.S. Justice Department and the Securities and Exchange Commission has been investigating its anti-corruption compliance in China, “which has mainly focused on entertainment and gift expenditures by the company’s local China external affairs department.”
The Wall Street Journal reported a phone call involving Goudis was recorded by another employee. The recording was given to Justice officials in 2018.
“The government has requested and is continuing to request documents and other information relating to these matters,” Herbalife said in an Oct. 30 filing.
“The company is conducting its own review and has taken remedial and improvement measures based upon this review, including replacement of a number of employees in China and enhancements of company policies and procedures in China. The company is continuing to cooperate with the government and cannot predict the eventual scope, duration or outcome of the government investigation at this time.”
Goudis took on the chief executive role in a high-profile promotion following the company reaching a $200 million settlement with the Federal Trade Commission about its operational and marketing practices in June 2016.
Michael Johnson, the company’s executive chairman, resumed his chief executive duties on an interim basis on Jan. 8. Johnson served as chief executive from 2003 until Goudis’ promotion.
The company’s executive succession plan includes an expectation of promoting a member of its senior leadership team to permanent chief executive.
CFRA Research analyst Scott Kessler said in a report Jan. 14 that “we do think this development will lead to more scrutiny of a company that has been the subject of much controversy over the last few years.”
The news about Goudis’ resignation was stunning locally, in part because he had been the primary Herbalife face for Winston-Salem operations.
Goudis made the in-person announcement of the company’s commitment to acquire the former Dell Inc. plant in December 2012 for an East Coast manufacturing plant for dietary supplements and milkshake powder. Production began in May 2014 with the plant having a workforce of about 750 at last count.
Goudis also came to Winston-Salem in December 2017 to celebrate Herbalife’s five-year involvement at the plant and in the local community.
Because Goudis voluntarily resigned, the company said he is eligible to receive payments from his executive compensation contract.
Goudis will receive $3.5 million, with 75 percent of those funds in equal installments between now and Nov. 30. The other 25 percent will be paid in a lump sum on the first regular payroll day after Dec. 1.
In exchange, Goudis will commit to not competing against Herbalife through Dec. 31, including not trying to recruit any employees, distributors or customers through that period.
He also has agreed to not make any negative or derogatory statements about the company or any of its affiliates, past or current officers, directors, employees or members.
Goudis also agreed to cooperate with Herbalife related to any internal or external investigations.”