The Securities and Exchange Commission has suspended a former KPMG leader from appearing or practicing before the agency after he was convicted of a felony last year.
On Sept. 11, 2019, David Middendorf, former national managing partner for audit quality and professional practice at KPMG, was sentenced to one year and one day in federal prison and three years of supervised release for his role in a scheme to subvert the regulatory inspection process. At the time of the sentencing, Manhattan U.S. Attorney Geoffrey Berman stated Middendorf was ”at the top of a chain of corruption that threatened to corrupt KPMG and the PCAOB’s inspections process”
Middendorf was convicted of wire fraud charges by a Southern District of New York jury in March 2019. He and four others were charged by both the Department of Justice and the SEC 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.
“In view of the foregoing, the Commission finds that Middendorf has been convicted of a felony within the meaning of Rule 102(e)(2) of the Commission’s Rules of Practice,” the SEC said in an administrative proceeding Wednesday.
The SEC later Wednesday published a separate administrative proceeding barring Jeffrey Wada under similar violations of Rule 102(e)(2). Wada, a former inspections leader at the PCAOB who provided KPMG employees with the confidential information from the audit regulator, was convicted of one count of conspiracy to commit wire fraud and two counts of wire fraud and sentenced to nine months in prison in October 2019.
In a related action, the SEC in November 2019 barred Cynthia Holder from practicing as an accountant before the Commission for her role in the inspections scandal. Holder, a former inspections leader at the PCAOB before later joining KPMG, was sentenced in August 2019 by the Justice Department for her actions. In addition to her eight-month term, Holder must serve two years of supervised release.