Former KPMG partner David Britt pleaded guilty to one count of conspiracy to commit wire fraud Thursday as the fallout from the cheating scandal that has plagued the firm for nearly two years appears to be nearing its conclusion.
Britt, the former co-head of the Banking and Capital Markets Group within the audit group of KPMG’s Department of Professional Practice, is the last of the five central KPMG figures at the heart of the scandal to either plead guilty or be found guilty by a jury. His crimes carry a maximum sentence of 20 years in prison, though previous sentences of other members involved suggest a penalty of less than a year to be more likely.
Britt may also face a maximum fine of $250,000 or twice the gross gain or loss from his offenses. His sentencing is scheduled for May 8, 2020.
Britt and four others were charged by both the Department of Justice and the Securities and Exchange Commission with a scheme to steal confidential inspection planning information from the Public Company Accounting Oversight Board regarding which KPMG audits would be selected for inspection. That would give engagement partners an opportunity to review their work before inspectors would begin poring over audit files.
According to U.S. Attorney Geoffrey Berman, Britt “admitted [Thursday] to obtaining confidential lists that contained the information on which KPMG audits would be reviewed by the PCAOB. Using the playbook he illicitly acquired, Britt used that information to improve the results of his firm’s audits. Independent reviews of accounting firm audits exist to ensure their integrity and accuracy. David Britt corrupted that process and now faces time in federal prison.”
Last month, David Middendorf, former national managing partner for audit quality and professional practice at KPMG and the individual found by Berman to be “at the top of a chain of corruption,” was sentenced to one year and one day in federal prison and three years of supervised release for his role in the scheme. Cynthia Holder, another ex-KPMG employee involved in the scandal, was sentenced to eight months in federal prison and two years of supervised release in August.
Thomas Whittle and Brian Sweet round out the five, and both pleaded guilty to wire fraud and corruption charges in 2018.
Additionally, Jeffrey Wada, an inspections leader at the PCAOB, was convicted of one count of conspiracy to commit wire fraud and two counts of wire fraud for his role in providing the KPMG employees with confidential information on certain of the PCAOB’s 2016 inspection selections in an effort to cheat the system.
Prior to the scheme, KPMG fared poorly in PCAOB inspections and in 2014 received approximately twice as many comments as its competitor firms. The cheating scandal is documented as having taken place from 2015 to 2017.
In June, the SEC settled charges related to the scandal with KPMG for $50 million, in addition to revealing allegations of cheating on internal exams that were also covered in the settlement.