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Thursday, Mar 28, 2024
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Second Valley Tie in KPMG Scandal

A criminal complaint filed Thursday in the KPMG insider trading case alleges the scheme netted $1 million and revealed that the second conspirator also was a Valley businessman. Scott London, an Agoura Hills resident and a partner at the accounting firm’s Los Angeles office who had been previously identified, passed confidential information to Bryan Shaw, a partner in Shaw Diamond Co. in Encino. Shaw used that information to trade in stocks with illegal profits totaling more than $1 million, the complaint filed in Los Angeles federal court alleges. Shaw, a Lake Sherwood resident, cooperated with law enforcement after confessing to authorities and made recordings of his conversations with London. The complaint states London received $5,000 on two occasions from Shaw for insider information, including once for Herbalife Ltd., the Los Angeles diet and supplement maker. London engaged in securities fraud from at least 2010 and through last month, the complaint alleges. “London provided confidential information to Shaw that included specific details about earnings and guidance information for certain KPMG clients,” the document stated. “On other occasions, London disclosed to Shaw confidential information about impending mergers concerning certain KPMG clients before that information was disclosed to the public.” London was charged with one count of conspiracy to commit securities fraud through insider trading in the criminal complaint, which does not name Shaw. However, both men were accused of securities fraud in a civil lawsuit filed Thursday by the Securities and Exchange Commission. The federal criminal charge carries a statutory maximum penalty of five years in prison, and a fine of $250,000 or twice the gross gain or loss from the offense. However, convicted defendants are often sentenced to less time under a formula that takes into account more elements of the crime, a defendant’s willingness to admit fault and other factors. London supervised more than 500 people at KPMG, including more than 50 in the audit department before he resigned Monday. He handled the audits for some publicly traded KPMG clients, including Skechers USA Inc., a Manhattan Beach casual shoe maker, and Pacific Capital Bancorp, a Santa Barbara-based institution, according to the complaint. That position gave him access to the kind of insider information he passed on. KPMG has resigned as auditor of the companies entangled in the scandal.

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