KPMG Legal Tactics Result in $30,000 Fine

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A California Superior Court judge has sanctioned KPMG for withholding documents in an accounting-malpractice case, ordering the Big Four firm to pay $30,000 to Targus Group International Inc.

Orange County Superior Court Judge Geoffrey Glass, in an order issued last Wednesday, said KPMG "deliberately or recklessly withheld or delayed in producing many responsive documents in order to gain unfair advantage.” According to the Associated Press, he added that “the Court warned KPMG-US at least twice about gamesmanship in discovery."

The judge also told the jury that they could weigh the behavior of KPMG when considering the case.

"Targus applauds the Court for sending a strong message to KPMG and its lawyers that conduct which smacks of gamesmanship will not and cannot be tolerated in this or any other lawsuit," Michael V. Ward, general counsel for Targus, said in a press release.

"We're disappointed by the Court's ruling," a KPMG spokesman said in a statement, AP reported. "We fully complied with all discovery orders in the Targus case. We plan to seek appellate review of this order."

Targus, a private manufacturer of computer cases, alleges in its 2003 lawsuit that KPMG's negligence resulted in the company suffering about $50 million in losses related to embezzlement by the former Chief Financial Officer William Anthony Lloyd. Lloyd used the company's credit facilities and cash for his personal benefit, hiding his activities through false entries on the company's books, which went undetected by KPMG, the company contends. Lloyd in 2001 pleaded guilty to 15 counts of wire fraud and has served jail time.

Two other judges have been critical of KPMG's actions during the discovery process in two separate cases involving the sale of tax shelters that were later termed abusive by the Internal Revenue Service.

Last May, a federal judge in Washington called a KPMG document log turned over to the IRS to be "inaccurate, incomplete and even misleading.” In March, a federal judge in Orlando denied an attempt by KPMG to force a software entrepreneur into arbitration in a fraud case connected with his purchase of a tax shelter. According to the AP, the judge said that for three years KPMG had "invoked the litigation process, with a vengeance ... in conduct that was flatly inconsistent with any desire to pursue arbitration."

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