Ex-KPMG Partner Faces Twenty Years in Prison for Securities Fraud
by Terri Eyden on
By Jason Bramwell
A former senior audit partner at KPMG LLP agreed to plead guilty on May 28 to a securities fraud charge for his role in an insider trading case involving a Los Angeles jewelry store owner.
Scott London agreed to plead guilty to one felony count of securities fraud that carries a maximum twenty-year prison term. He's scheduled to appear in court on May 31.
London received more than $50,000 in cash and gifts, including a $12,000 Rolex watch, from Bryan Shaw as a result of stock tips that London provided the jewelry store owner. Prosecutors said Shaw made at least $1.2 million in illicit profits.
Shaw pleaded guilty May 20 to one count of conspiracy and is scheduled to be sentenced September 16. He faces a maximum of five years in prison.
London, who was fired by KPMG, was a twenty-nine-year veteran of the Big Four accounting firm and supervised more than fifty audit partners and 500 employees.
"Behavior like this is an affront to people who follow the law and compromises the public perception in the inherent fairness of the markets by creating an uneven playing field," said André Birotte Jr., US attorney for the Central District of California, as reported by the New York Times.
London provided the inside information about his clients to help his friend Shaw overcome financial struggles after his family-run jewelry business began faltering in the economic downturn.
According to the US Securities and Exchange Commission (SEC), London was the lead partner on several KPMG audits, including Herbalife and Skechers USA Inc., and he was the firm's account executive for Deckers Outdoor Corporation. He was able to obtain important nonpublic information about these companies prior to their earnings announcements or release of financial results.
Shaw grossed profits of more than $714,000 from trading based on confidential financial data about Herbalife, Skechers, and Deckers, according to the SEC.
London also gained access to inside information about impending mergers involving two former KPMG clients – RSC Holdings and Pacific Capital. Shaw made nearly $192,000 by purchasing RSC Holdings stock the day before its December 15, 2011, merger announcement. He also made more than $365,000 in illicit profits by purchasing Pacific Capital securities prior to a merger announcement on March 9, 2012, according to the SEC.
- LA Jeweler Pleads Guilty in KPMG Insider Trading Case
- Former KPMG Partner Scott London Charged with Insider Trading
- KPMG Insider Trading Scandal Latest Blow to Accounting Industry's Reputation
You may like these other stories...
Regulators struggle with conflicts in credit ratings and auditsThe Public Company Accounting Oversight Board (PCAOB), which was created by the Sarbanes-Oxley Act in 2002, released its third annual report on audits of...
Regulatory compliance, risk management and cost-cutting are the big heartburn issues for finance execs in the C-suite. Yet financial planning and analysis—a key antacid—is insufficient.That's just one of the...
A review of Financial Accounting Standards Board (FASB) guidance on share-based payment transactions found that the 2004 standard achieves its purpose and provides useful information to investors and other users of financial...
Upcoming CPE Webinars
This webcast will include discussions of recently issued, commonly-applicable Accounting Standards Updates for non-public, non-governmental entities.
Excel spreadsheets are often akin to the American Wild West, where users can input anything they want into any worksheet cell. Excel's Data Validation feature allows you to restrict user inputs to selected choices, but there are many nuances to the feature that often trip users up.
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.
This webcast will include discussions of commonly-applicable Clarified Auditing Standards for audits of non-public, non-governmental entities.