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Former KPMG partner Scott London pleads guilty to insider trading

In a surveillance photo provided by law enforcement authorities, former KPMG partner Scott London, left, meets with Bryan Shaw.
(U.S. attorney’s office)

Former KPMG auditor Scott London pleaded guilty to an insider-trading charge Monday, admitting he revealed secret information about his company’s clients to a friend who used the tips to make more than $1 million from resulting stock trades.

London, 50, entered the guilty plea before U.S. District Judge George H. Wu in Los Angeles.

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KPMG, a giant in the accounting world, startled Wall Street in April when it revealed that London, a senior partner, had disclosed some of its clients’ secrets to a stock-trading friend.

London’s friend, Encino jeweler Bryan Shaw, pleaded guilty to a conspiracy charge in May. He is scheduled to be sentenced Sept. 16.

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Both men have acknowledged that London gave Shaw sneak previews of company earnings reports and told him about acquisitions involving KPMG clients before they were made public, and that Shaw used the information to make trades.

The insider-trading charge carries a potential sentence of 20 years in federal prison, but London is expected to serve significantly less time because he has no prior criminal record.

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Shaw has admitted giving London tens of thousands of dollars in cash in exchange for the inside information about KPMG’s clients.

According to court documents, Shaw said he typically arranged to meet London on a side street near Shaw’s business so he could give London bags containing $100 bills wrapped in $10,000 bundles.

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Shaw said he also gave London a $12,000 Rolex Cosmograph Daytona watch, jewelry and concert tickets in exchange for the confidential information.

“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. Atty. Andre Birotte Jr. said.

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“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,” Birotte said.

KPMG withdrew as auditor for two of the involved clients, Herbalife Ltd. and Skechers USA Inc., forcing the companies to scramble to find new accounting firms.

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