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Ex-KPMG auditor London leaked data on five clients, SEC alleges

April 11, 2013|By Andrew Tangel
  • Pedestrians walk past the offices for the accounting firm KPMG LLP in Los Angeles.
Pedestrians walk past the offices for the accounting firm KPMG LLP in Los… (Patrick T. Fallon / Bloomberg )

NEW YORK -- Former KPMG senior auditor Scott London leaked confidential information on five companies, illegal tips that won him $50,000 in bags of cash as well as other perks, the U.S. Securities and Exchange Commission alleged.

Previous reports of the insider-trading scheme involving London and his friend Bryan Shaw focused on confidential information related to nutritional supplement maker Herbalife and footwear company Skechers, two firms whose audits London oversaw. 

The SEC's complaint, released Thursday, alleges London also passed information about Deckers Outdoor Corp., a company for which London served as the account executive.

Full coverage: KPMG auditor accused of insider trading

Shaw "routinely traded at least a dozen times" based on illicit tips he received from London, the SEC said. The scheme earned Shaw more than $1.2 million in illegal profits, by the SEC's count.

“London was honored with the highest trust of public companies, and he crassly betrayed that trust for bags of cash and a Rolex,” George Canellos, the SEC's acting director of enforcement, said in a statement.

Further, the regulator alleges London gained access to confidential information about impending mergers involving two former KPMG clients, RSC Holdings and Pacific Capital.

The SEC complaint, which names London and Shaw as defendants, claims London received not only the Rolex -- valued at $12,000 -- but also expensive jewelry for his wife. In addition to expensive meals, Shaw also covered the costs of concerts for both of their families, the SEC said.

Federal prosecutors in Los Angeles filed a parallel criminal case on Wednesday.

KPMG announced earlier this week that it fired London -- though it did not name him -- shortly after it learned he leaked sensitive client information to a friend -- later identified as Shaw -- who then traded stocks using the illicit tips.

KPMG resigned as auditor for both Herbalife and Skechers. Herbalife has recently been caught in the middle of a nasty Wall Street fight between major hedge fund investors.

Shaw's family runs the Shaw Diamond Co. jewelry store in Encino. Both Shaw and London have acknowledged their roles in the scheme.

"I expect that my actions will result in significant civil and criminal consequences, but I realize that this is the painful price I will pay for my transgressions," Shaw said in a statement Wednesday.

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