Crime & Safety
Accountant Pleads Guilty to Securities Fraud
Scott London had access to confidential information about KPMG's clients before that information was disclosed to the public.
A former KPMG senior partner agreed Tuesday to plead guilty to securities fraud for accepting bribes in exchange for passing confidential information about the accounting firm's clients, including Southland-based companies Herbalife and Skechers USA.
Scott I. London, 50, of Agoura Hills is charged with a single federal count of securities fraud through insider trading. The felony charge carries a possible prison term of up to 20 years, prosecutors said.
In a plea agreement filed Tuesday, London admitted providing confidential information about KPMG clients to Bryan Shaw, a close friend, over a period of several years. Shaw used the information to make highly profitable securities trades that Shaw has admitted earned him more than $1 million in illegal proceeds.
"Over the course of several years, Mr. London secretly fed confidential, insider information to a man he knew would use that information to make trades," U.S. Attorney Andre Birotte Jr. said."
Behavior like this is an affront to people who follow the law and compromises the public perception in the inherent fairness of the markets by creating an uneven playing field," he said. "As a result of his illegal conduct, Mr. London has agreed to plead guilty and will face a lengthy prison term."
London was a senior partner at KPMG who supervised more than 500 accounting professionals at the firm and personally handled audits for major KPMG clients, including Herbalife and Skechers.
As a result of his position, London had access to confidential information about KPMG's clients before that information was disclosed to the public.
In the plea agreement, London admitted that he disclosed inside information to Shaw regarding at least 14 separate earnings announcements or acquisitions for KPMG clients, including:
- Herbalife's May 2, 2011, earnings announcement;
- United Rentals' Dec. 16, 201,1 announcement of its acquisition of RSC Holdings;
- Herbalife's Feb. 21, 2012, earnings announcement;
- Deckers Outdoors' Feb. 23, 2012, earnings announcement;
- Union Bank's March 12, 2012 announcement of its acquisition of Pacific Capital Bancorp; and
- Deckers Outdoors' April 26, 2012, earnings announcement.
According to court documents, Shaw also said that he typically arranged to meet London on a side street near Shaw's jewelry store in Encino so that he could give London bags containing $100 bills wrapped in $10,000 bundles.
Shaw also said he gave London a $12,000 Rolex Daytona Cosmograph watch, as well as jewelry and concert tickets, in exchange for the confidential information.
On two occasions earlier this year, acting at the direction of the FBI, Shaw met with London and gave him cash as supposed payment for confidential information about KPMG clients, according to court documents.
In the first instance, London met with Shaw on a street corner in Encino and accepted a bag with $5,000 in cash as payment for confidential information about Herbalife's earnings announcement in February 2013.
London later met with Shaw in a parking lot in Woodland Hills and accepted another bag with $5,000 in cash, which was supposedly London's share of the illegal profits from trades based on confidential information about Decker's February 2013 earnings announcement.
London is scheduled to appear in Los Angeles federal court on Friday afternoon for arraignment, but it is expected that the hearing will be delayed until a later date, according to the U.S. Attorney's Office.
Shaw pleaded guilty to a conspiracy charge on May 20 before U.S. District Judge George H. Wu, who scheduled sentencing for Sept. 16.
-- City News Service
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