KPMG's Scott London bribed with rolex

The former head of KPMG’s audit practice may face up to five years in prison, if convicted.

New Statesman
Scott London was former head of KPMG’s audit practice. Photograph: Getty Images.

The US attorney’s office in Los Angeles has filed a criminal case against Scott London, a former head of KPMG’s audit practice, for sharing confidential information of five companies with his golf partner Bryan Shaw in exchange for bundles of cash and a Rolex watch.

Mr London, a California-based journalist and consultant, passed on secret data about Herbalife, Skechers, Deckers Outdoor, RSC Holdings and Pacific Capital to Bryan Shaw.

The US authorities alleged that Mr London received a $12,000 Rolex Daytona Cosmograph watch, cash in bundles of $10,000, dinners and more than $25,000 in concert tickets for sharing secret information.

Shaw, who made more than $1m by trading on the secret information, secretly recorded conversations with Mr London.

Shaw’s lawyer read a statement from his client saying: “I expect that my actions will result in significant civil and criminal consequences, but I realise that this is the painful price I will pay for my transgressions.”

In addition, the Securities and Exchange Commission (SEC) has filed civil cases against Mr London and Shaw for illegal trading that started in 2010 when Shaw’s jewellery business struggled during the financial crisis.

The SEC alleged that the two men exchanged information about the three KPMG clients and two former clients, mostly using mobile phones. According to the authorities, London tipped Shaw off about takeovers a few days before the public announcement, reported the Financial Times.

Shaw’s brokerage account was frozen by Fidelity in July 2012, causing him to fret that their trading scheme had been detected, authorities allege.

Shaw told authorities that he called Mr London who said insider trading was like “counting cards in Las Vegas – if you were caught, they simply ask you to leave because they cannot prove it”, according to the complaint.

Shaw started co-operating with the US authorities in February and began secretly recording phone conversations with Mr London.

On February 21, Mr Shaw arranged to meet Mr London with FBI agents watching. They exchanged an envelope that contained a cash of $5,000. On March 7, the two men met in a Starbucks parking lot for another exchange, which was recorded by the FBI.

Mr London recommended Mr Shaw take profits in one stock, saying: “We’re gonna have, we’ll have more, more, um, you know, opportunities.”

Mr London resigned as auditor of Skechers and Herbalife on Monday, saying “that the firm’s independence had been impacted” due to insider trading.