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Geoffrey Berman, the United States Attorney for the Southern District of New York, announced this week that David Britt, 54, was among five former employees at accounting firm KPMG who are facing charges in connection with their scheme to defraud the Securities and Exchange Commission for several years through an elaborate series of back channels.
The Public Company Accounting Oversight Board (PCAOB), which is overseen by the SEC inspects audit work performed by accounting firms “with respect to the financial statements of publicly traded companies,” Berman said. In recent years, KPMG “fared poorly in PCAOB inspections," leading to the scheme.
Britt was a partner in the audit group within the Department of Professional Practice for several years, during which time, Berman said he and several co-conspirators “worked to illicitly acquire valuable confidential information from the PCAOB, including information concerning when KPMG audits would be inspected, in an effort to game the system and improve inspection results."
According to Berman, top executives from KPMG had a list of full confidential final inspection selections as recently as 2017. They later went on to burn evidence, delete relevant text messages, emails, documents and had a series of “burner phones” so conversations could not be monitored.
Britt surrendered himself into custody on Tuesday, when he was charged with conspiracy to defraud the United States, wire fraud and conspiracy to commit wire fraud. If convicted, Britt faces up to 85 years in prison.
“These defendants were each meant to be the watchmen of our financial system. The defendants who formerly worked for KPMG were vested with the responsibility to audit publicly filed financial statements and issue audit opinions relied upon by the investing public," Berman stated.
"The defendants who formerly worked for the PCAOB were supposed to help ensure the quality of the work behind those audits. But, as alleged, these defendants chose to cheat the system and to undermine the safeguards put in place to protect investors. We will work tirelessly with our law enforcement partners to root out corruption like this wherever it is found.”
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