By Jason Bramwell
A Los Angeles jewelry store owner faces a maximum of five years in prison after he pleaded guilty May 20 for his role in an insider trading case involving a former senior audit partner at KPMG LLP.
Bryan Shaw, fifty-two, pleaded guilty to one count of conspiracy and is scheduled to be sentenced September 16, according to a May 20 article by the Associated Press (AP).
Former KPMG partner Scott London was charged on April 11 in federal court in Los Angeles with conspiring to commit securities fraud through insider trading. Prosecutors allege he received more than $50,000 in cash and gifts, including a $12,000 Rolex watch, for providing stock tips that enabled Shaw to make at least $1.2 million in illicit profits.
London, who was fired by KPMG, is scheduled to be arraigned next week. He could face up to five years in prison and up to $250,000 in fines if convicted.
A twenty-nine-year veteran of the Big Four accounting firm, London supervised more than fifty audit partners and 500 employees.
In a statement shortly after being charged, Shaw called his actions "stupid" and said he would take full responsibility for what he's done.
"In this guilty plea, Mr. Shaw continued his path to fully accepting responsibility for his actions and doing the right thing", Shaw's attorney Nathan Hochman said, as reported by AP.
Both Shaw and London also face charges in a related civil suit by the Securities and Exchange Commission (SEC).
In an April 11 press release, the SEC stated the two men had met at a country club several years earlier and became close friends and golfing partners. London provided the inside information about his clients to help Shaw overcome financial struggles after his family-run jewelry business began faltering in the economic downturn.
London began providing Shaw with nonpublic information in October 2010, and the misconduct continued for the next eighteen months. This year, Shaw allowed federal agents to record calls with London and wore a recording device when meeting with him while FBI agents listened in.
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. Therefore, London was able to obtain important nonpublic information about these companies prior to their earnings announcements or release of financial results.
Shaw "routinely traded at least a dozen times on the inside information he received from London", the SEC said. "He grossed profits of more than $714,000 from trading based on confidential financial data about Herbalife, Skechers, and Deckers."
The SEC alleges that London also gained access to inside information about impending mergers involving two former KPMG clients – RSC Holdings and Pacific Capital.
"London tipped Shaw with the confidential details. Shaw made nearly $192,000 by purchasing RSC Holdings stock the day before its December 15, 2011, merger announcement. He made more than $365,000 in illicit profits from his well-timed purchase of Pacific Capital securities prior to a merger announcement on March 9, 2012", the SEC stated.
"London was honored with the highest trust of public companies, and he crassly betrayed that trust for bags of cash and a Rolex", George Canellos, acting director of the SEC Division of Enforcement, said in the press release.
Harland Braun, London's lawyer, said last month that his client plans to plead guilty to the criminal charge. London turned over his Rolex watch to the FBI as well as $7,500 in cash, Braun said. London was freed on $150,000 bond after his hearing on April 11.