Herbalife board member's undisclosed involvement in Brazilian criminal case - Update Reuters reports the involvement of a Herbalife director in a long running corruption case in Brazil, something that has not been disclosed in company filings since Pedro Cardoso joined the board in 2009. Prosecutors in Brazil charged current Herbalife board member Pedro Cardoso with money laundering in 2008 for allegedly participating in an embezzlement scheme a decade earlier that siphoned 26.7 million Brazilian reais ($10.4 million) from the state government in Espirito Santo. The 8th Criminal Court of Vitoria ordered bailiffs to serve him with a subpoena in 2010, but they did not locate him and the case remains open, according to court filings and a court source. According to the U.S. Securities and Exchange Commission's rules on disclosure, companies must report legal proceedings that are material to evaluating the integrity of a director. Mr Cardoso gave us this response: This relates to a private matter involving an amount of $2,500, that dates back to 1998, prior to any involvement with Herbalife Board. It was completely unrelated to my Herbalife business. I have received no official notification of any kind with regards to this matter. Herbalife said*: We first became aware of this situation two days ago. On a yearly basis, all prospective and current board members are asked about any pending or closed proceedings that occurred during the prior ten years. Mr. Cardoso has always responded in the negative. The case in question is part of a long running embezzlement inquiry dating back to events between 1998 and 2002, in the state of Espirito Santo. Highly controversial in Brazil, it has moved forward slowly. Those who Google translate read Portugese can catch up on the background here. The alleged scheme consisted in simulating government payments to various entities, such as neighborhood associations, even city halls and churches. But the checks went astray. José Carlos Gratz, former president of the state legislature, was convicted in the case in 2011 and faces a prison term, although he remains free while appealing the judgement. He has claimed that his signature on the checks was forged. According to the 2008 complaint, Mr Cardoso is alleged to have colluded with Mr Gratz in December 1999 while a partner at Abadas & Mortalhas, cashing a check for 6,000 Rials. Here is a copy of that complaint, click for the full document: Mr Cardoso is a longstanding senior distributor within Herbalife's Multi-Level Marketing scheme, and became a board member in 2009. In terms of the disclosure requirement under US rules, this looks like the relevant part of Section 401 dealing with disclosure about Directors: (f) Involvement in certain legal proceedings. Describe any of the following events that occurred during the past ten years and that are material to an evaluation of the ability or integrity of any director, person nominated to become a director or executive officer of the registrant: (2) Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); No doubt Mr Cardoso will want to defend himself against the charge to prove his innocence, now he has been made aware of it. Were he to step down as a director whilst doing so, the effect on the balance of the boardroom is worth considering. Carl Ichan controls five of the 11 seats, and Herbalife recently announced Leroy Barnes, head of the audit committee, will retire in the New Year. Clearly we are speculating, and the company may be able to recruit new directors unintimidated by the prospect of multiple government investigations which Herbalife expects to exonerate it, but five of nine board seats would hand the veteran investor control. An update to the post added comment from Herbalife.