On January 23, 2018, an indictment was unsealed in the Southern District of New York against David Middendorf, Thomas Whittle, and Davis Britt, former executives of accounting firm KPMG LLP (“KPMG”), Cynthia Holder, a former employee of KPMG and the Public Company Accounting Oversight Board (the “PCAOB”), and Jeffrey Wada, a former employee of the PCAOB, with conspiracy and wire fraud charges.  Brian Sweet, a former KPMG partner and PCAOB associate, pled guilty to his role in the fraudulent scheme and is cooperating with the government.  The indictment alleges that the defendants used confidential information stolen from the PCAOB to inform KPMG partners of future PCAOB audit inspections.  In 2014, KPMG performed poorly in its PCAOB inspections.  In 2015, KPMG took steps to improve its PCAOB inspection performance by hiring and recruiting former PCAOB employees such as Sweet.  The indictment alleges that between 2015 and 2017, Middendorf, Whittle, Britt, Holder, Wada, and Sweet illicitly acquired confidential PCAOB information concerning KPMG audits and notified KPMG partners before inspections occurred.  Middendorf, Whittle, Britt, and Sweet allegedly launched a stealth “re-review program” that allowed KPMG to revisit its past audit work, strengthen its analysis, and identify deficiencies or perform new audit work, in efforts to bolster its work product before a forthcoming PCAOB inspection.  United States v. David Middendorf et al., 18-cr-00036 (S.D.N.Y.)

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