Business

Visit from FBI the end for auditor in KPMG insider-trading scandal

Accounting and AuditingHerbalife LimitedFBISkechers USA IncorporatedInsider Trading

The sinking feeling that his life was about to capsize hit Scott London when the FBI knocked on the door of his Agoura Hills home one morning a couple of weeks ago.

As the ex-KPMG auditor said in an interview with the Los Angeles Times, he was about to leave for work when a pair of FBI agents flashed their badges and asked to come inside.

“They just showed up and said you’re subject to an investigation,” London said of the life-altering conversation in his kitchen. “I felt about as bad as you could feel. It was as if everything I had earned and accomplished was gone.”

Full coverage: KPMG auditor accused of insider trading

London’s is the self-induced personal tragedy that underlies the headline-grabbing announcement by KPMG Tuesday that it had fired an employee allegedly involved in insider trading and resigned as auditor of two companies whose information was used in the scheme.

The scandal, in which London has now publicly acknowledged passing insider tips to a friend, engulfed his ex-employer KPMG, as well as two prominent Southern California companies, Herbalife Ltd. and Skechers USA Inc.

KPMG fired London late last week after the Justice Department informed the accounting giant that London, a top auditor in the firm’s Los Angeles office, was the subject of an insider-trading probe. The scandal has potentially significant implications for Herbalife.

The biggest personal question in insider-trading scandals is usually the simplest and the hardest to answer: Why did a well-paid professional who clearly knew better risk his livelihood and reputation?

London had no real explanation. “I just don’t know what I was thinking,” he told The Times.

Still, as he sifts through the personal and professional wreckage, London appears to have conflicting feelings.

One moment he portrayed himself as simply trying to help an unnamed friend in the jewelry business who was in financial trouble. He said he initially didn’t realize that his friend was poking him for trading tips and, even when he did, London said he gave only general information.

“He said, ‘Just so you know, I bought those shares' and then my heart just dropped thinking, ‘Oh my God, what did he do?' ” London said. “He just kept asking. He’d say, ‘How is Herbalife doing this quarter?' And I’d indicate if it was having a good quarter. I didn’t say ‘buy.’ I probably said, ‘You’d do well by buying it but there's nothing in it for me.’ I can't explain it, but it’s what it is.”

But upon prodding, London acknowledged that the friend rewarded him with a series of small payments -- $1,000 to $2,000 at a time that altogether totaled less than $25,000. His friend also treated him to a few dinners and presented him with a Rolex watch.

"The only thing I care about right now is protecting my family,” London said. “My name was pretty much dragged through the mud [Tuesday] and I’m sure it will continue to be.”

ALSO:

Fired KPMG auditor can't explain 'lapse of judgment'

Emerging trading scandal is the last thing Herbalife needed

'What I have done was wrong,' says auditor accused of insider trading

Follow Walter Hamilton on Twitter @LATwalter

Copyright © 2014, Los Angeles Times
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Accounting and AuditingHerbalife LimitedFBISkechers USA IncorporatedInsider Trading
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