KPMG Sued by Missouri Department of Insurance

Big Four firm KPMG is the defendant in a lawsuit filed last Thursday by the Missouri Department of Insurance. The suit, filed in Jackson County Circuit Court in Kansas City, Missouri, alleges that KPMG contributed to the 1999 downfall of General American Holding Company.

KPMG was auditor for General American and also acted as a consultant to the insurer. The lawsuit claims that General American was advised by KPMG to develop and sell certain funding agreements that included a clause whereby the investor could cash in the agreement with seven days' notice. After selling billions of dollars of the agreements, General American experienced a ratings downgrade which resulted in a stampede of investors giving their seven days' notice and hoping to cash in their funding agreement. When Great American couldn't meet the investor demand it was forced into receivership.

The lawsuit alleges that KPMG concealed information from investors as well as board members and did not require disclosure of the risk associated with the funding agreement.

KPMG spokesman Bob Zeitlinger stated, "We deny allegations that KPMG contributed in any way to the liquidity issues faced by General American in 1999. We stand behind the work we performed and will defend ourselves vigorously."


Already a member? log in here.

Editor's Choice

Upcoming CPE Webinars

Dec 3The materials discuss the concepts and principles in the AICPA’s new special purpose framework.
Dec 8Kristen Rampe will cover how to diffuse the tension in challenging situations in this one-hour webinar.
Dec 9A key component to improving your firm’s workflow efficiency while enhancing your profitability at the same time is how you leverage emerging technologies.
Dec 16Kristen Rampe will give tips on how to bring confidence into the room and build a valuable network.