Former KPMG senior partner to plead guilty to securities fraud
29 May 2013
A former senior partner at accounting firm KPMG's Los Angeles office has agreed to plead guilty to a securities fraud charge of passing on inside information about the firm's clients to a friend, who made over $1 million in stock trades.
Scott London, 50, who supervised over 500 KPMG auditors, agreed yesterday to plead guilty to one felony charge, according to a court document he signed but the date he would enter the guilty plea has not yet been scheduled.
Bryan Shaw, London's stock-trading friend pleaded guilty to a conspiracy charge last week.
Both men acknowledged that London allowed Shaw previews of company earnings reports and kept him well posted over acquisitions involving KPMG clients before they were made public, with Shaw using the information to make trades.
The insider trading charge could potentially land London 20 years in jail, but commentators said London would receive significantly less time due to his having no prior criminal record.
Shaw has admitted he gave London thousands of dollars in cash in exchange for inside information about KPMG's clients.
Court documents also show that Shaw also claimed he typically arranged to meet London on a side street near Shaw's business so that he could hand over to London, bags containing $100 bills in $10,000 bundles.
London, 50, supervised over 500 accounting professionals at KPMG and oversaw audits of Herbalife Ltd and Skechers USA Inc prosecutors said. In addition to the maximum term of 20 years in federal prison London also faced a maximum fine of $5 million or twice the gross gain or gross loss resulting from his offence, according to the plea agreement.
London's plea agreement comes after around a week of Shaw pleading guilty to one count of conspiracy to commit securities fraud for his role in the scheme.
In his plea agreement, London admitted that he passed on inside information pertaining to at least 14 separate earnings announcements or acquisitions by KPMG clients, including Herbalife's 2 May 2011 earnings announcement and United Rentals' 16 December, 2011 announcement of its acquisition of RSC Holdings, prosecutors said.
Shaw agreed to make a payment of around $1.3 million in restitution and continue to cooperate with the government's investigation as part of his plea.
Shaw, who pleaded guilty on 20 May, has a sentencing hearing on 16 September.
