Attestation Update – A&A for CPAs

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Another interview with admitted inside-trader from KPMG

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Scott London has given another interview, this time with the Agora Hills Acorn – Community leader’s fall from grace stemmed from insider trading.

If you are really interested in the former KPMG partner’s story, you’ll want to check out the article.

Here’s a few interesting tidbits with my observations:

The insider work ran for about 16 months when Mr. London and his golf buddy, Bryan Shaw, mutually decided to end it, according to the article.

The article expands the developing narrative that passing on insider info started slowly and just grew over time. On one hand, you might think that makes it sound a bit more innocent. On the other hand, that tells me there would have been many opportunities to say ‘stop.’

After a break, the conversations and info sharing resumed when the FBI wired Mr. Shaw for a sting operation. Seems to me that again provided opportunities to say ‘knock it off.’

The article says Mr. London says Mr. Shaw said the illicit proceeds would be split three ways:

a piece for Shaw, a piece for London and another portion to be socked away for taxes.

That would be why Mr. London thought the $50K plus watch would imply that Mr. Shaw had made around $200K. (50K cash + ~10K/12K watch = ~60K ; ~60K / 3 = ~180K ; ~180K rounds to ~200K).

Mr. London presumably didn’t audit (or review or compile) Mr. Shaw’s trading profits, so it makes sense Mr. London thought the proceeds were about 200K.

That answers the question I had about why Mr. London was so shocked the proceeds were around $1.3M instead of $200K.

The article says his family and friends have stood by him. I’m glad for that.

Two more minor consequences

He was able to break the news to his wife and son directly. Even though that was a very bad conversation (umm, honey, can we chat a minute about why the FBI wanted to talk to me this morning?), look how their daughter got the news:

His daughter, who was studying abroad for a semester, read about it while she was in Barcelona. 

From the guilty plea on July 1 until the expected sentencing on October 22, look at the huge uncertainty hanging over his head:

Besides not knowing how many years he will serve in prison, London also isn’t sure how big a fine he will be required to pay and whether KPMG will file a civil lawsuit against him.

A few years or 20. A fine equal to much of his liquid assets or all the investments he can readily liquidate. A civil suit or not with the costs running from merely big (for legal fees to get ready, just in case) to humongous (potential exposure enough to maybe wipe out his entire net worth).

He also

…expects to be a pariah in the financial industry.

Yeah, I think so.

Written by Jim Ulvog

July 11, 2013, 8:58 am at 8:58 am

Posted in Audits

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