KPMG has been forced to resign as auditors of two major US companies after recently-sacked senior partner, Scott London, admitted to leaking insider information to a friend who used it to trade stocks
The Big Four firm has relinquished the contracts for Californian shoe-maker Skechers and nutritional product provider Herbalife after deciding that its independence had been adversely affected.
It is now reportedly under investigation from US authorities and shares in both companies have now been suspended.
Late yesterday, KPMG released a hard-hitting statement denouncing London, describing his actions as violating the firm’s rigorous policies and protections. “This individual…betrayed the trust of clients as well as colleagues, and acted with deliberate disregard for KPMG’s long-standing culture of professionalism and integrity.”
As soon as the firm found out that the partner had been passing on insider information about several West Coast companies, he was “separated from the firm”.
“We have informed these companies it is necessary to withdraw our auditor reports,” the statement continued. “We have no reason to believe that the financial statements of these companies have been materially misstated.”
London, who has had a 30-year career at the accounting giant, sent a statement to the Wall Street Journal today, in which he admitted to leaking the information to a friend but absolved his employers of any knowledge or wrongdoing relating to the incident.
He said the information was given to help a friend whose business was struggling and that it started “a few years back”.
"Never once did I pass any documents to him, but rather we spoke on the phone and the information I provided was in the form of a suggestion. He traded on the information, but to this day I am not aware of how much he profited from the information. Regardless, what I have done was wrong and against everything that I had believed in.
"I spent nearly 30 years at KPMG and I dedicated my entire life to that firm. This is the main reason why this is so difficult for me to go through. Knowing that I have caused harm and embarrassment to those that I respected and admired in the firm has caused me tremendous grief that I am sure I will never overcome,” he wrote.
KPMG meanwhile is seeking to distance itself from the former audit partner’s activities. “KPMG’s 22,000 partners and employees unequivocally condemn this individual’s rogue actions,” it stated.
“We regret the impact this individual’s actions have had on any of our clients."
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