U.S. Accuses Accountants of Trying to Game Reviews of KPMG Audits


The S.E.C.’s lawsuit cites a text message from one of the defendants in which he describes having sent a “grocery list” of KPMG audits to be reviewed by the oversight board.

Federal prosecutors announced that one of the former KPMG employees, Brian Sweet, pleaded guilty on Jan. 5 to a conspiracy and wire fraud charge. Mr. Sweet is cooperating with the authorities, they said.

KPMG said in a statement that it promptly notified the authorities in early 2017 after discovering what its former employees had done. The firm added that it had since “taken remedial actions to assure that such conduct cannot happen again.”

Mr. Sweet, according to court filings, left the oversight board in 2015 for a job with KPMG. At the time, he took with him confidential information about the board’s planned review of audits conducted by KPMG. Mr. Sweet subsequently obtained additional confidential information from the board and shared it with other employees at KPMG, the authorities said.

Four of the former KPMG employees were indicted by a federal grand jury on conspiracy and wire fraud charges. They are David Middendorf, Thomas Whittle, David Britt and Cynthia Holder.

Jeffrey Wada, who worked at the government accounting board, also was indicted.

Aside from Mr. Sweet, none of the accused have entered pleas. Richard Morvillo, the attorney for Mr. Sweet, said his client’s guilty plea was “taking a first step” toward addressing his mistakes.

Lawyers for the other people charged either could not be reached for comment or said their clients intended to contest the charges.

The authorities contend that after Mr. Sweet joined KPMG, he got confidential information from Ms. Holder, who at the time worked at the oversight board. After Ms. Holder joined KPMG, she then got confidential information from Mr. Wada, the authorities said.

Mr. Wada, they said, passed on confidential information to Ms. Holder at the same time he was trying to land a job at KPMG. The passage of confidential information had continued until early last year.

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