KPMG global chairman speaks about insider trading fiasco
John Veihmeyer, U.S. and global chairman of KPMG, addressed the Scott London insider trading mess during a speaking event with the University of Richmond’s Robins School of Business on Tuesday evening, March 4.
I found coverage of his discussion in two media outlets:
- Richmond Times-Dispatch – KPMG top executive reflects on difficult choices in Richmond talk
- The Collegian, University of Richmond student newspaper – KPMG chairman speaks at fireside chat
The Times-Dispatch article has the following comments:
Veihmeyer said he made the decision to fire London on the day — a Friday afternoon — he learned the partner was under federal investigation.
The following Monday, Veihmeyer told the firm’s leadership team not to circle the wagons, but to put out a public announcement about the investigation. KPMG also withdrew as the accounting firm for the two companies that had been compromised.
The article then quotes Mr. Veihmeyer explaining the firm had to make difficult decisions without all the information at hand. Sometimes you have to make your best call on
..the best bad option that you have available to you at the moment.”
Article then explains additional timing:
When London was charged that same week, Veihmeyer said he had copies of the criminal complaint emailed to every employee with the message, “This is not who we are.”
Here’s some guidance on how to look at organizations from the outside when something goes horribly wrong. I find the concept has tremendous value in many situations.
“The measure of an organization is not whether you have somebody do something that is inconsistent with your values,” he said. “The measure of an organization is what you do when you find out about it.”
Maybe you couldn’t do anything to prevent a bad situation developing. It is possible to get blindsided. The issue is what do you do when the situation hits you. How do you handle it?
I’ve applied that concept on several audits. Something came up that was the duty of senior leadership or the board to address. Presenting their issue to them allowed me to watch their reaction. How the people dealt with their situation showed me their priorities and values. On more than one occasion I’ve been able to observe my clients’ integrity in real time.
Let me rephrase the comments from Mr. Veihmeyer on the timing.
The situation broke on a Friday; that’s when he learned of the investigation of Mr. London.
He decided to fire Mr. London that day.
On the following Monday he told his team to prepare and issue a press release that same day.
In the same paragraph, the article says KPMG decided to withdraw from two audits. The article doesn’t say which day that decision was made.
Mr. London was charged during that same week. When KPMG got hold of the criminal complaint, it was sent out to every employee of the firm.
The Collegian article gave different details on a few key points, which I will quote and then parse. When the information hit the firm’s office, there was a choice to be made about how fast to address the issue:
The firm had a choice between evaluating the matter in a long, internal and confidential process or taking an alternative route, he said.
They addressed the issue head on.
By that Monday morning, Veihmeyer addressed a group, and shared a list of accomplishments that needed to be completed by 4 p.m. that day. Someone spoke up saying that the firm had more time than those few hours because the information would not be public knowledge by that time. In this instance, Veihmeyer said it would, in fact, be public because KPMG was going to put out a press release on the matter.
Let me rephrase that.
The article says by Monday morning, Mr. Veihmeyer had decided to have KPMG get news out. On Monday morning, his team has a list of tasks to complete by 4 that afternoon. Someone on the staff said they would have more time than that because the news wouldn’t be breaking by then.
Mr. Veihmeyer indicated it would be KPMG that made the info public by then.
Releasing news that bad before it comes out some other way is an assertive way to deal with a disaster.
People who study crisis management will have time over the next few years to dissect the moment-by-moment decision-making. In the meantime, that is a good lesson for all of us on how to take charge of a mess and deal with it.
The blog Going Concern has a discussion as well. I picked up on the story from their article, John Veihmeyer Not at All Ashamed to Talk Scott London to Business School.
By the way, here’s another minor consequence for Mr. London – watch how Adrienne Gonzalez has redefined his name.
If you recall, an anonymous KPMG insider wrote a piece for us last year just after the Scott hit the fan and talked about how that very response from the firm felt like just what he wanted from the firm.
Update: Greetings to everyone arriving from Going Concern or twitter links. You can find much more on Mr. London by following the insider trading tag. Current status of his sentencing date can be found here. He’s due back in court on April 21st, by the way.