KPMG came under fire in South Africa after a local bank that the firm had given a clear audit in 2017 collapsed last month
A former executive director at “big four” global accountancy firm KPMG pleaded guilty Tuesday to scheming to help the company cheat on oversight inspections, federal prosecutors announced.
Cynthia Holder, a former accounting inspections leader later hired by KPMG, was one of six people charged in January with illegally using confidential information stolen from the Public Company Accounting Oversight Board so that KPMG could perform better on PCAOB inspections between 2016 and 2017.
The oversight board is a non-profit organisation created by Congress to prevent accounting scandals like those of the Enron era in the early 2000s.
The charges follow KPMG’s decision last year to fire five former partners, including the head of its audit practice, after the company improperly learned which audits government regulators planned to review.
Prosecutors say that while she was employed by the PCAOB, Holder manoeuvred for work at KPMG, feeding the company information about which of its audits the board would inspect.
After being hired, Holder likewise stole confidential information on her way out the door that she shared with KPMG and then later attempted to destroy evidence, the US Attorney’s office said.
“This was a revolving door tainted by fraud and today we hold the defendant accountable for her conduct,” US Attorney Geoffrey Berman said in a statement.
Holder, 52, pleaded guilty to one count of conspiracy to the defraud both the PCAOB and the Securities and Exchange Commission, a count of conspiracy to commit wire fraud and two counts of wire fraud.
The charges carry decades in prison and hundreds of thousands of dollars in fines — although maximum sentences are rarely imposed.
Brian Sweet, another PCAOB employee later hired by KPMG, pleaded guilty in January to conspiracy and wire fraud charges.
A trial against four other defendants is slated to begin in February.
Officials in January did not identify the companies under audit by KPMG but said the audits in question, while imperfect, did not pose a danger to the investing public.
Jay Clayton, chairman of the SEC, which brought charges against the same individuals, said at the time he believed companies and the investing public could continue to rely on KPMG.
In August of last year, KPMG agreed to pay $6.2 million to settle SEC charges that its audit of the oil and gas company Miller Energy Resources had left investors “misinformed” about the company’s value.
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