SEC charges former KPMG partner and his friend over $1.2 Million trading scheme
Eliane Chavagnon Reporter, Family Wealth Report
Daily News Analysis
The Securities and Exchange Commission has charged Scott London, the former partner in charge of KPMG’s Pacific Southwest audit practice, and his friend, Bryan Shaw, with insider trading based on non-public client information.
Separately, London has been charged by the US Attorney’s Office for the Central District of California. Shaw is cooperating with the authorities and does not face criminal charges at this time. He met with London twice, purportedly to pass on cash in exchange for information, at the behest of the Federal Bureau of Investigations.
While London said he provided the inside information about his clients to help Shaw overcome financial struggles, the SEC said that Shaw harvested over $1.2 million in illicit profits trading ahead of earnings or merger announcements.
Shaw paid London at least $50,000 in cash in exchange for the illegal trading tips, according to the SEC’s complaint. He also gave London an expensive Rolex watch as well as other jewelry, meals, and tickets to entertainment events.
London worked at KPMG for nearly 30 years and recently informed the firm that he was under investigation by the SEC and criminal authorities for insider trading in the securities of several KPMG clients. The firm immediately terminated him, the SEC said.
KPMG also resigned as independent auditor for Herbalife and Skechers, two companies for which London had been acting as lead partner and about which he revealed inside information to Shaw.
“As a result of his unlawful activities, it was clear that our independence had been impaired,” said KPMG’s chairman and chief executive, John Veihmeyer.
According to the SEC’s complaint, which was filed in federal court in Los Angeles, London started providing Shaw with non-public information in October 2010. The misconduct continued for 18 months.
The SEC complaint seeks a final judgment permanently ordering both men to disgorge ill-gotten gains as well as for them to pay prejudgment interest and financial penalties. It also seeks to enjoin them from future violations of these provisions of the federal securities laws, the authority said
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