KPMG auditor should get 3 years for insider trading, prosecutors say

Prosecutors want former KPMG auditing partner Scott London to serve three years in federal prison for giving confidential information about his firm’s clients to a friend, who used the tips to make more than $1 million in illegal stock-trading profits.

London pleaded guilty to insider-trading last year and was fired by KPMG. He is scheduled to be sentenced April 21 at U.S. District Court in Los Angeles.

Asst. U.S. Atty. James A. Bowman said in a sentencing memo that London had participated in a “calculated and corrupt arrangement” that victimized the companies whose secrets he was paid to protect.

Last year, defense attorney Harland Braun argued that London should serve no more than 18 to 24 months in prison. He said London had already paid dearly for his crime, losing his $900,000-a-year job, his reputation and becoming alienated from longtime friends at the company who are banned from talking to him.

London’s friend, an Encino jeweler named Bryan Shaw, said he made about $1.27 million in illegal profits on trades involving several KPMG clients, including Herbalife Ltd. and Skechers USA Inc.

Shaw said London read him advance copies of news releases about company earnings and planned acquisitions, which he used to get a step ahead of the stock market. He said he rewarded London with secret cash payments, gifts that included a Rolex watch, meals and concert tickets. The rewards were valued at nearly $70,000, prosecutors said.

When law enforcement officers became suspicious of the well-timed and profitable trades, Shaw agreed to cooperate in an investigation of London, making secretly recorded telephone calls and allowing FBI agents to photograph him making a cash payment to London.

Shaw has also pleaded guilty and is awaiting sentencing.


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