Danny McCance 17 Oct 2018 11:31am

Ex-KPMG US partner admits stealing PCAOB information

Cynthia Holder has pleaded guilty to participating in a scheme aimed at helping KPMG cheat on regulator inspection

The former KPMG partner and former Public Company Accounting Oversights Board (PCAOB) inspector participated in a scheme to obtain and disseminate information to improve KPMG’s performance in PCAOB inspections, the results of which are used by the Securities and Exchange Commission (SEC) to fulfil its agency functions.

“Holder undermined the work of the SEC and the PCAOB by stealing confidential inspection information from her former employer, the PCAOB, and helping insiders at her new employer, KPMG, to cheat the regulatory system put in place to protect the investing public,” said US attorney Geoffrey Berman.

“This was a revolving door tainted by fraud and today we hold the defendant accountable for her conduct,” he added.

She pleaded guilty to one charge of conspiracy to defraud the United States, which carries a maximum five-year sentence and $250,000 (£190,000) fine, and one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years and a $250,000 fine.

She also pleaded guilty to two counts of wire fraud, which each carry a maximum sentence of 20 years and a $250,00 fine, and will be sentenced on the 5 April 2019.

Holder was arrested in January alongside her colleagues David Middendorf former KPMG national manager partner for audit quality and the professional practice, Thomas Whittle, former national partner in charge for inspections and David Britt, former banking and capital markets group co-leader.

Former PCAOB employee and KPMG partner Brian Sweet and former PCAOB inspector Jeffrey Wada were also arrested at the same time.

In August, a motion filed by the partners requesting a search of the SEC file’s for more details on prosecutors’ claims was denied by the judge overseeing the case.

Sweet has already agreed to settle an SEC order barring him from appearing or practising as an accountant on the grounds of him violating PCAOB ethics rules.

In a statement the Department of Justice said KPMG fared poorly in PCAOB inspections and in 2014 received approximately twice as many comments as its competitor firms. “By 2015, KPMG was engaged in efforts to improve its performance in PCAOB inspections, including but not limited to recruiting and hiring former PCAOB personnel” such as Holder and Sweet.

The trial of the remaining defendants is due to begin on 11 February 2019.