KPMG has been forced to resign as auditor to two Californian companies after a former senior partner in the US came under investigation for insider trading based on confidential information gained during audits at the companies.
Scott London, who spent nearly 30 years with KPMG, is under scrutiny by the Securities and Exchange Commission (SEC) and other US authorities over allegations that he leaked confidential information about two audit clients, shoe manufacturer Skechers and nutrition group Herbalife.
In a statement sent to the Wall Street Journal, London said the leaks started 'a few years back' in an attempt to help a friend whose business was struggling, and that 'these actions were by my choice and mine only.'
'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,' London said.
London said his colleagues did not know of his actions, which he claimed had no impact on recent difficulties Herbalife has had with investors concerned about the company's business practices.
In a statement Herbalife said that while the accusations had led to the withdrawal of KPMG's 2010, 2011 and 2012 audits, it believed the accountant's reports nonetheless gave an accurate reflection of the company's financial position.
A statement from Skechers said that KPMG had told the company that London was cooperating with authorities and that there was 'no reason to believe there were any misstatements' in its financial statements.
KPMG said its 22,000 US partners and employees condemned London's 'rogue actions'. In a statement, the firm said: 'Late last week, we were informed that the partner in charge of KPMG's audit practice in our Los Angeles business unit was involved in providing non-public client information to a third party, who then used that information in stock trades involving several west coast companies. The partner was immediately separated from the firm.'
