July 21, 2018

SEC Accuses KPMG Partner, Two Others With Insider Trading

Thomas Avent, KPMG's Southeast region partner-in-charge of mergers and acquisitions is in a bit of trouble. The Securities and Exchange Commission filed a lawsuit against Avent, his stockbroker Raymond Pirrello and Pirrello's friend, Lawrence Penna of insider trading.

The allegations are simple enough: Avent had access to material, non-public information through his KPMG's work of providing tax due diligence to clients. Avent allegedly told Pirrello about three deals: 1) NCR Corp's 2011 purchase of Radiant Systems Inc; 2) TBC Corp's 2011 acquisition of Midas Incorporated Inc, and 3) Ingram Micro Inc's 2012 takeover of BrightPoint Inc.

Pirrello then passed on the info to his pal, Penna. For this information, Penna then made payments to Pirrello (e.g. one for $14,500 to Pirrello's AMEX). And Pirrello made payments and other benefits to Avent (e.g. $50k in cash and arranging someone to buy a $250k "illiquid investment").

Naturally, this is having an affect effect on Avent's work situation:

KPMG said on Friday that it was "deeply troubled" by the allegations and had placed Avent, a 63-year-old Atlanta resident, on administrative leave.

James Cobb, Avent's lawyer, said in an email that the SEC claims were meritless and that his client always followed the law. "Mr. Avent intends to defend this case vigorously, and he is confident that his name will be cleared," Cobb added.

You can read the Reuters report if you want the bare bones. The fun stuff, as usual, is in the SEC's complaint. It includes the blow-by-blow account between all the parties involved. Here's one example from the TBC/Midas deal:

After Midas announced its intent to be sold to TBC, Avent and Pirrello had this snipey text message exchange:

Avent's displeasure didn't end there:

In one case, Avent invested $14k into a penny stock, "because Pirrello was 'convinced [the stock] was going to be very profitable.'" 

It's funny that Avent, Phil Mickelson and Scott London all seem to have the same level of common sense with regards to insider trading. In my fantasies, they've golfed in a three-man scramble together.

SEC accuses KPMG partner in Atlanta, two others of insider trading [Reuters]
Litigation release [SEC]
Complaint [SEC]

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SHOCKER: Number of Fraud Cases in the Courts is High

In probably the most shocking news of the day, KPMG’s “fraud barometer” reports that the number of fraud cases in UK courts in the first six months of the year are the highest since the firm started issuing the report, 21 years ago.
Here in the states, the big sexy fraud gets all the attention but there is plenty of small fraud to go around. Plus, the bright side is, we’ve haven’t seen anything yet:

“These figures are bad, but the worst is yet to come,” Hitesh Patel, a partner at KPMG, said. “It will be a number of years before the impact of the recession fully feeds through into the fraud statistics.”

So our advice would be for any of you that are nervous about layoffs, look into getting transferred to the forensic accounting practice. You won’t be out of work any time soon.
Record total of fraud cases in court – and worse to come [FT.com]