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Ex-KPMG Partner Latest to Plead Guilty in Auditing Scheme (1)

Oct. 3, 2019, 7:46 PMUpdated: Oct. 3, 2019, 9:25 PM

A former KPMG LLP partner pleaded guilty to charges that he plotted to get advance tips on audit inspections by a U.S. regulator.

David Britt, who led the firm’s banking and capital markets group, entered his plea to conspiracy to commit wire fraud Oct. 3 just weeks before he was to stand trial in Manhattan.

Prosecutors said Britt, 56, schemed with staff from the Public Company Accounting Oversight Board who gave KPMG a list of clients expected to be reviewed by inspectors. The firm used the information to double-check its work for those clients to avoid inspection violations, the U.S. said.

Britt told Judge Paul Oetken he shouldn’t have followed orders to use the confidential information he received from Brian Sweet, who worked for the PCAOB prior to joining KPMG.

“I should have raised my hand as high as I could,” Britt said while expressing regret for allowing the scheme to continue. The Australia native could face deportation after serving 27 to 33 months in prison. His lawyers patted his back after hearing his immigration status was at-risk. He’s scheduled to be sentenced on May 8.

Three others pleaded guilty, including Cynthia Holder, a former PCAOB employee who was sentenced to eight months in prison.

Two fought the charges and were convicted in March. David Middendorf, the firm’s onetime national managing partner for audit quality and professional practice, was sentenced last month to a year and a day behind bars for his role in the plot to revise

KPMG’s audits. Jeffrey Wada, who was a PCAOB inspections leader, passed confidential tips about planned inspections to KPMG officials. Wada is awaiting sentencing.

KPMG agreed to pay $50 million in June to settle Securities and Exchange Commission allegations that it altered past audit work after receiving the tips of upcoming inspections.

The PCAOB, which is the main U.S. regulator of auditors and overseen by the SEC, was created after the Enron and WorldCom scandals to build confidence in how public companies report their financial results.

© 2019 Bloomberg L.P. All rights reserved. Used with permission.

((Updated throughout))

To contact the reporters on this story:
Gerald Porter Jr. in New York at gporter30@bloomberg.net;
Amanda Iacone in Arlington at aiacone2@bloomberg.net

To contact the editors responsible for this story:
David Glovin at dglovin@bloomberg.net