Ex-KPMG Partner Faces Twenty Years in Prison for Securities Fraud
May 29th 2013
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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.
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.