KPMG ex-partner in Insider Trading

kpmgEx-Partner of KPMG was charged with insider trading by Securities Exchange Comission. The comission alleged that Scott London, Ex-Partner of KPMG tipped Bryan Shaw with confidential details about five KPMG audit clients and enabled Shaw to make more than $1.2 million in illicit profits trading ahead of earnings or merger announcements.

KPMG Ex-partner helps friend in Insider Trading

The two men had met at a country club several years earlier and became close friends and golfing partners. London has said that he provided the inside information about his clients to help Shaw overcome financial struggles after his family-run jewelry business began faltering in the economic downturn. In exchange for the illegal trading tips, Shaw paid London at least $50,000 in cash that was usually delivered in bags outside of his Encino,  jewelry store. Shaw also gave London an expensive Rolex watch as well as other jewelry, meals, and tickets to entertainment events.

London, who worked at KPMG for nearly 30 years, recently informed the firm that he was under investigation by the SEC and criminal authorities for insider trading in the securities of several KPMG clients. The firm immediately terminated him.

According to the SEC’s complaint filed in federal court in Los Angeles, London began providing Shaw with nonpublic information in October 2010 and the misconduct continued for the next 18 months. Shaw and London communicated almost exclusively using their cell phones, although on at least one occasion London disclosed nonpublic information in the presence of others during a golf outing.

According to the SEC’s complaint, London was the lead partner on several KPMG audits including Herbalife and Skechers USA, and he was the firm’s account executive for Deckers Outdoor Corp. Therefore, London was able to obtain material, nonpublic information about these companies prior to their earnings announcements or release of financial results.

The SEC alleges that London also gained access to inside information about impending mergers involving two former KPMG clients – RSC Holdings and Pacific Capital. London tipped Shaw with the confidential details. Shaw made nearly $192,000 by purchasing RSC Holdings stock the day before its Dec. 15, 2011, merger announcement. He made more than $365,000 in illicit profits from his well-timed purchase of Pacific Capital securities prior to a merger announcement on March 9, 2012.

Read the SEC Complaint here

 

Lloyds considering action against KPMG

KPMG LooydsLloyds banking group is considering legal action against KPMG in HBOS Bank Audit. Accountancy giant KPMG in the UK is under scanner over the audit work that gave HBOS, banking and insurance company, ‘a clean chit’ in the run-up to its collapse.

Lloyds Banking Group Considering action against KPMG

The Financial Reporting Council (FRC) confirmed it would consider launching an investigation of KPMG’s role following last week’s damning Parliamentary Commission report on HBOS.

The move will come once the Financial Conduct Authority (FCA) presents its findings on the bank’s failure in the autumn, the Daily Star reports.

It comes as a further blow to KPMG after it was forced to quit as auditor of two US firms, nutritional products group Herbalife and footwear maker Skechers amid an FBI investigation into alleged insider trading involving a former employee.

KPMG, which audited HBOS’ accounts throughout the years leading up to the financial crisis, said they stood by the quality of their audit work at HBOS.

Lloyds Banking Group, which rescued HBOS at the height of the banking meltdown, is also reportedly considering legal action against KPMG for failing to spot the black hole in its accounts.

The Parliamentary Commission on Banking Standards said last week that a combined total of 28 billion pounds had been invested into HBOS by the taxpayer and Lloyds.

HBOS was brought to its knees by reckless lending and billions of pounds of bad debts, but KMPG signed off its accounts in 2008, the report added.

Source: Yahoo Finance

Accounting fraud in TheStreet

The Securities and Exchange Commission today charged TheStreet, Inc. and three executives in connection with a 2008 accounting fraud at a former subsidiary of TheStreet, Inc. The fraud allowed TheStreet to report artificially inflated revenue and misstated operating income or loss in each period of 2008.

The SEC alleges that throughout 2008, Eric Ashman, TheStreet’s former Chief Financial Officer, aided and abetted the fraud by improperly and prematurely recognizing revenue based on several of the former subsidiary’s transactions. According to the complaint, Ashman caused TheStreet to recognize revenue when he knew or recklessly disregarded that there was no basis for revenue recognition.

Gregg Alwine and David Barnett, co-presidents of the subsidiary, are alleged to have aided and abetted the fraud by entering into sham transactions, and fabricating and backdating contracts and other documents. In addition, Barnett is charged with leading TheStreet’s auditor to believe that the subsidiary had performed services and thereby earned revenue on a specific transaction when in fact it had not performed those services.

For its part, TheStreet is charged with lacking appropriate internal controls over its subsidiary’s revenue and with violating books and records and reporting provisions of the securities laws.

Source url: SEC

 

Serious Fraud office investigate Rolls Royce

rolls royce

British aerospace and defence firm Rolls Royce is co-operating with fraud investigators over allegations of bribery and corruption involving intermediaries in China and Indonesia, the company says.

Rolls Royce said it had passed on the results of an internal investigation to the Serious Fraud Office (SFO), an independent government body that investigates and prosecutes serious or complex fraud and corruption.

The company, which is the world’s second-largest maker of aircraft engines behind US group General Electric, said the investigation followed a request for information from the SFO about allegations of malpractice in Indonesia and China.

Carter’s Accounting Fraud

Securities and Exchange Commission charged Michael Johnson, a divisional merchandise manager at Kohl’s, which is a national department store. The complaint alleged that Johnson assisted the financial fraud at Carter’s, Inc, an Atlanta-based manufacturer of children’s clothing. Specifically, the SEC alleges that Johnson assisted Joseph Elles, a former Executive Vice President of Sales at Carter’s, in concealing his financial fraud from senior Carter’s management. That scheme caused Carter’s to materially misstate its net income and expenses in several financial reporting periods between 2004 and 2009.

The SEC’s complaint, filed in the United States District Court for the Northern District of Georgia, alleges that between 2004 and 2009, Elles fraudulently manipulated the amount of discounts that Carter’s granted to Kohl’s, Carter’s largest wholesale customer in order to induce Kohl’s to purchase greater quantities of Carter’s clothing for resale. In an effort to conceal the scheme, Elles persuaded Kohl’s to defer subtracting the discounts from payments until later periods. Elles also persuaded Johnson, who handled the Carter’s account at Kohl’s to sign a false confirmation that misrepresented to Carter’s accounting personnel the timing and amount of those discounts. By concealing the amount of discounts that had been promised to Kohl’s, Elles and Johnson caused Carter’s to materially understate it expenses in certain quarters and materially overstate its earnings in those quarters.

After conducting its own internal investigation, Carter’s was required to issue restated financial results for the affected periods.

The SEC’s complaint alleges that Johnson violated Rule 13b-2 of the Securities Exchange Act of 1934 (“Exchange Act”), which prohibits any person from directly or indirectly falsifying or causing to be falsified an issuer’s accounting records. The complaint also alleges that Johnson aided and abetted Elles’ violations of Section 13b(5) of the Exchange Act, which among other things, prohibits any person from knowingly falsifying the books, records and/or accounts of an issuer, and Rule 13b2-1 thereunder. The SEC is seeking permanent injunctive relief and financial penalties against Johnson.

Source: SEC