Sunday, October 25, 2020

Former KPMG partner admits theft of confidential information in PCAOB cheating scandal

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A former KPMG partner and co-leader of the firm’s banking and capital markets group admitted stealing and using confidential information so KPMG could improve the outcome of PCAOB inspections.

David Britt, 56, pleaded guilty in federal court in New York Thursday to one count of conspiracy to commit wire fraud.

His sentencing is set for May 8, 2020.

He faces up to 20 years in prison.

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In June this year, KPMG LLP agreed to pay a $50 million fine to settle SEC civil charges that former partners used stolen information to learn about surprise regulatory reviews of the firm’s audits and cheated on training exams.

KPMG admitted the SEC’s findings and allegations.

The DOJ and SEC charged six accountants with misappropriating and using confidential information about the PCAOB’s planned inspections of KPMG. The six included former officials at the PCAOB who went to work at KPMG, and three former KPMG partners.

Cynthia Holder, 53, a former PCAOB inspections leader and executive director at KPMG, was sentenced to eight months in prison in August after pleading guilty to two counts of conspiracy to commit fraud.

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In a trial that ended in March this year, David Middendorf, 54, a former national managing partner for audit quality at KPMG, and Jeffrey Wada, 43, a former inspections staffer at the PCAOB, were convicted of conspiracy to commit wire fraud and substantive wire fraud.

Middendorf was sentenced last month to a year and a day in prison.

The PCAOB (Public Company Accounting Oversight Board) is a nonprofit corporation overseen by the SEC. Every year it inspects audit work that registered accounting firms have done for public companies. It doesn’t disclose in advance which audits it will inspect.

In recent years KPMG scored poorly on PCAOB inspections. Starting in 2015, the firm tried to improve its results by recruiting and hiring former PCAOB personnel, including Brian Sweet.

During Sweet’s first week on the job, Britt and other KPMG partners asked him for confidential PCAOB information about which KPMG audits would be inspected.

Manhattan U.S. Attorney Geoffrey Berman said Thursday, “Independent reviews of accounting firm audits exist to ensure their integrity and accuracy. David Britt corrupted that process and now faces time in federal prison.”

The SEC called KPMG’s misconduct “frankly, astonishing.”

KPMG fired five partners and another employee after the PCAOB investigation started.

Source: The FCPA

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