Troubled Mannatech Inc. fired its auditor, Grant Thornton LLP, on Thursday after the accounting firm took the highly unusual step of asking the company to remove its chairman.
Coppell-based Mannatech, a supplier of nutritional supplements, appointed BDO Seidman LLP as the new auditor.
In a written statement, Mannatech said the change came after Grant Thornton requested that the company either remove Samuel L. Caster, chairman and founder of Mannatech, from "all responsibilities or engage another independent accounting firm."
Mannatech's board of directors decided that the request "was not in the best interest of shareholders," the statement said.
Shares of Mannatech have been tumbling since early July, when the Texas attorney general's office filed a lawsuit accusing the company of exaggerating the therapeutic benefits of its products for those with cancer, Down syndrome, cystic fibrosis and other conditions.
Mr. Caster had voluntarily resigned as chief executive in August while remaining chairman. The company said then that the resignation was unrelated to the lawsuit and that Mr. Caster wanted to concentrate on his "passion for working with independent associate leaders" within the company.
Since July, the share price has dropped from $16 to Thursday's closing price of $9.01.
Grant Thornton declined to comment, and a prepared statement from BDO said, "We look forward to serving as Mannatech's independent auditors and to building a long-term relationship."
Experts say auditors have become much tougher in the wake of corporate scandals and the Sarbanes-Oxley Act.
Still, it's rare for an audit firm to demand that a chairman step down.
Mark Cheffers, chief executive of Accounting Malpractice .com in Sutton, Mass., said he could recall only one other such incident in recent years - the case of Adelphia Communications Corp. The founders of now-defunct Adelphia, a cable company, were charged with securities violations.
"We have tracked 10,000 auditor changes over the past five years, and I can't recall but that one incident. It is rare for this to happen," Mr. Cheffers said. "There has to be something clearly dysfunctional taking place" between the auditor and the company.
Dallas auditor Ken Sibley of Sibley & Co. expressed some surprise that a firm of BDO Seidman's standing would step into this situation.
"BDO had to satisfy themselves that they could take over the audit," Mr. Sibley said. "BDO apparently was able to reconcile whatever it was that dissatisfied Grant."
In fact, Mr. Cheffers said, the fact that BDO took the audit engagement is a positive for the current management.
"BDO wouldn't do that unless it felt that things were not the way Grant Thornton said they were," Mr. Cheffers said.
Mannatech's filing with the Securities and Exchange Commission announcing the auditor change stated that there were no disagreements with Grant Thornton over accounting principles, financial statement disclosures or auditing procedures.
Two weeks after being sued by the attorney general, Mannatech released new sales and marketing guidelines for associates, including an order to immediately stop using questionable marketing materials. It also began a satisfaction-guaranteed refund policy.
President and chief operating officer Terry L. Persinger was appointed interim CEO while the company searches for a permanent successor.
