Big Four accounting firm KPMG has agreed to pay $125 million as a result of a class action lawsuit filed by shareholders of Rite Aid, the nation's third-largest drugstore chain. The action resulted from allegations that officers of the drugstore company made false statements to shareholders in published financial statements for the purpose of driving up the price of the company stock. The financial statements in question, which were audited by KPMG, were for fiscal years 1997 through 1999. Indictments are pending against four Rite Aid executives.
KPMG stated that the firm resigned from its audit of Rite Aid in 1999 after alerting Rite Aid's audit committee of weaknesses in the company's internal audit controls.
In addition, KPMG has agreed to pay $75 million to shareholders of Oxford Health Plans after a computer snafu at Oxford in 1977 resulted in collection and payment delinquencies. KPMG was accused in the lawsuit of giving a false and misleading opinion.
KPMG denies wrongdoing in both cases and states that it agreed to the settlements "for practical business reasons."