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

SEC investigates KPMG Deloitte PwC and EY

Securities and Exchange Commission began administrative proceedings on 3rd December’2012, against the China affiliates of KPMG Deloitted PwC EY and another large U.S. accounting firm BDO, for refusing to produce audit work papers and other documents related to China-based companies under investigation by the SEC for potential accounting fraud against U.S. investors.

  • BDO China Dahua Co. Ltd
  • Deloitte Touche Tohmatsu Certified Public Accountants Ltd
  • Ernst & Young Hua Ming LLP
  • KPMG Huazhen (Special General Partnership)
  • PricewaterhouseCoopers Zhong Tian CPAs Limited

The SEC order can be found here.

In Massive Probe Of Chinese Reverse Mergers, Securities and Exchange Commission is investigating allegations that U.S. firms and individuals have joined with partners in China to steal billions of dollars from American investors through stock market frauds. David Zhou and his son were penalised in the reverse merger frauds.

Reverse Merger

The private company shareholders receive a substantial majority of the shares of the public company (normally 85% to 90% or more) and the control of the board of directors. The transaction can be accomplished in as little as two weeks, resulting in the private company becoming a public company. The transaction does not go through a review process with state and federal regulators because the public company has already completed the process. The transaction involves the private and shell company exchanging information on each other, negotiating the merger terms, and signing a share exchange agreement. At the closing the public shell company issues a substantial majority of its shares and the board control to the shareholders of the private company. The private company shareholders pay for the shell and contribute their private company shares to the shell company and the private company is now public.

In our next article we will discuss the specific companies involved in the reverse merger frauds in USA.

KPMG & Deloitte in trouble over HP-Autonomy Deal

KPMG HP AutonomyA new shareholder lawsuit over Hewlett-Packard’s acquisition of British software firm Autonomy has named Big Four audit firms KPMG & Deloitte as defendants, alleging they missed numerous red flags about Autonomy’s accounting.

The lawsuit, filed on Tuesday in federal court in San Jose, California, also named HP’s board of directors, officers, and former executives, alleging breach of duty and negligence for their role in HP’s acquisition Autonomy.

HP has contacted the SEC’s enforcement division and the UK’s Serious Fraud Office.HP has requested that both agencies open criminal and civil investigations into this matter. In addition, HP intends to seek redress against various parties in the appropriate civil courts to recoup what we can for our shareholders”.

The company spent about $10.2 billion to acquire Autonomy, with the write-down putting the investment — or burden on shareholders, if you will — at $16 billion.

But who should be held accountable? During today’s conference call, Benjamin Reitzes, Barclays Capital analyst, asks: “Who are you holding accountable internally?”

“The CEO at the time and the head of strategy who led this deal are both gone, Léo and Shane Robison”, Whitman answers. “Most of the board was here and voted for this deal, and we feel terribly about that. What I will say is the board relied on audited financials, audited by Deloitte, not brand x accounting firm but Deloitte. And by the way, during our very extensive due diligence process, we hired KPMG to audit Deloitte, and neither of them saw what we now see after someone came forward to point us in the right direction

SFIO to probe KPMG role in INR870 Crore Reebok case

Global audit major KPMG will face questions from the Serious Frauds Investigation Office (SFIO) in connection with the Rs 870-crore alleged fraud at Reebok India, corporate affairs secretary Naved Masood said on Monday. While Delhi-based N Narasimhan & Co was the statutory auditor of Reebok India, a forensics team from KPMG had also been tasked in 2010 by the German company to probe any instance of financial irregularities in its Indian subsidiary by its senior executives. KPMG is also global auditor of Adidas. It is believed that KPMG forensics report had given a clean chit in its findings.

SFIO inquiry will look into the overall alleged fraud in the company and the role of KPMG will also be covered as part of this.

The SFIO is expected to look into the entire issue. With regards to KPMG, they will broadly look into three issues.

  1. Whether it is a fact that KPMG had given a clean chit in its forensic report; if so,
  2. Whether this should have been given; and lastly, if wrongly given,
  3. Whether anything happened that led to this

The economic offences wing (EOW) of the Gurgaon police department is also understood to have questioned officials of KPMG India over the matter.

Source: Times of India

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