California federal court hears guilty plea from former executive

A high profile, former partner for the accounting firm KPMG recently plead guilty to a securities fraud charge in a federal court in California.

Federal officials accused the man of insider trading. However, the scope of the alleged white collar crime was small, involving only a friend of the 50-year-old former executive. The man’s daily work routine involved overseeing audits of various client companies. In the case of two audits, involving Herbalife Ltd. as well as shoemaker Skechers USA Inc., the man allegedly shared some tips with a friend. The friend acted on the insider information by making some stock trades, and to great profit -- earning almost $1.3 million.

The alleged tips were made over a two-year period, between 2010 and 2012. The man allegedly received jewelry, a Rolex watch and around $50,000 in cash from his friend. However, the man claims that his motivation wasn’t money, but concern over his friend’s reportedly struggling business.

The man also underestimated the amount of profit his friend made. He testified that he assumed that his $50,000 payout represented around one-third of the profits, for a total under $200,000. Unfortunately, prosecutors in securities fraud cases often consider the amount of money implicated in the fraud. As a result, the $1.3 million gained from insider trading may have added to the severity of this crime.

Although insider trading is a federal crime, and could implicate a sentence in federal prison, the court may take into consideration potentially mitigating factors in this case. For example, the man’s confessed motivation was to help one particular friend, rather than a fraudulent scheme designed to garner personal profit.

Source:, “KPMG ex-partner on insider-trading plea: 'Worst day of my life,'” Stuart Pfeifer, July 1, 2013


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