Sometimes Being Fired for an Independence Snafu Isn’t That Hard of a Pill to Swallow

Late on Friday, TransMontaigne Partners, L.P.*, "a terminaling and transportation company," issued a press release announcing that they had successfully filed its 10-K for 2011. Not a big deal really, but reading further one discovers that the company had very recently fired KPMG as its auditor:

As previously disclosed, the audit committee of our general partner dismissed KPMG LLP from its engagement as the principal accountant to audit the financial statements of TransMontaigne Partners L.P. on December 15, 2011. The dismissal of KPMG LLP resulted from the determination that KPMG LLP was not "independent" of TransMontaigne Partners L.P. within the meaning of the rules of applicable regulatory agencies, and did not qualify as independent at the time of our audits for the years ended December 31, 2010 and 2009, and prior periods. 

Well! That's interesting, isn't it? Let's take a look at this previous disclosure, shall we?

On December 7, 2011, KPMG LLP communicated to Partners that KPMG LLP did not meet the independence standards of applicable regulatory agencies with respect to Partners as a result of services provided by KPMG LLP to Morgan Stanley and certain of its affiliates outside of the TransMontaigne group.  Because Morgan Stanley indirectly owns and controls TransMontaigne GP L.L.C., which, in turn, controls Partners, the services provided by KPMG LLP to other entities in the Morgan Stanley Group has caused KPMG LLP to be in violation of the independence rules with respect to Partners.  The Audit Committee of TransMontaigne GP is working to evaluate the independence of alternate auditors, with a view to engaging a new principal accountant as quickly as reasonably practical.

This all sounds vague, so I tried emailing the Denver office managing partner for some clarification, but haven't received a reply. I then asked a trusted source who is familiar with situation what details (s)he could share. From the sounds of it, the "services" that KPMG was providing were non-audit services; my source speculated that it was some sort of "loaned staff" arrangement. Whatever the nature of the services, our source said that the amount of fees that KPMG was receiving from Morgan Stanley dwarfed the audit fee from TransMontaigne (no surprise) and thus, being fired didn't really cause too much pain for KPMG. (S)he even alluded that it was a "no brainer" for KPMG to let this one go (i.e. inform TransMontaigne of the conflict) because of the fees involved.

Hey! But all is cool now. Just hope the New York sends Denver some cheesecakes or something since they took one for the team.

*Okay, full disclosure time: TransMontaigne is located in Denver. I worked in Denver's KPMG office for a time. I never had the pleasure of auditing TransMontaigne. It sounded awful.

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