An ex-partner at KPMG has been a bit naughty. In fact, he’s been more than a bit naughty as he’s been accused of insider trading.
Insider trading is the illegal activity of using information which isn’t in the public domain to make a personal gain or avoid a personal loss.
Scott London was a partner at KPMG in the US and led their LA audit practice. Two of their major clients were the nutrition supplement giant Herbalife and the leading footwear company Skechers.
It’s been alleged that Mr London passed on price sensitive information to a golfing friend of his who then subsequently made more than $1.2 million in illicit trading of shares ahead of merger or earnings announcements (in other words, the golfing friend bought shares at a low price knowing that the share price would increase as soon as the information he was secretly given was released into the public domain).
The US Securities and Exchange Commission charged Mr London and his golfing buddy with insider trading on non-public information.
As soon as KPMG found out about this Mr London was fired and quickly became an ex-partner in the firm.
A statement from Mr London was published in the Wall Street Journal where he apologised “for any harm that results to KPMG”. He went on to say that “I regret my actions in leaking non-public data to a third party regarding the clients I served for KPMG”.
It’s not looking very good for Mr London as the authorities will no doubt come down heavily on him.
It’s unfortunate for KPMG as well as due to Mr London’s illegal activities their independence on the audits of Herbalife and Skechers had been compromised. As a result they have resigned as auditors of both Herbalife and Skechers.