KPMG "unfaithful" in defending in opposition to Silentnight effective: Tribunal – Enterprise Insurance
(Reuters) – KPMG has put forward an "untrue" defense when it tried to reduce a fine imposed on its conflict of interest in the sale of UK bed maker Silentnight in 2011, the UK accounting watchdog said Wednesday.
A conflict of interest was discovered at KPMG, one of the so-called Big Four accounting firms in the world, while advising both Silentnight and the US private equity firm HIG Capital, which was planning to buy the British firm.
In August, the Financial Reporting Council announced that KPMG fined £ 13 million ($ 17.7 million), the highest for an accounting firm in a non-audit case, while partner David Costley-Wood was fined £ 500,000.
KPMG fined no more than £ 5 million in an independent court in June.
On Wednesday, the FRC released the tribunal's report as it set the amount of the fine and the case in general.
"This is the first time the tribunal has ruled that a defendant has brought an untrue defense," the FRC said in a statement.
The FRC had argued that Mr. Costley-Wood, who no longer works at KPMG, had assisted with a "Burning Platform" strategy to drive Silentnight into bankruptcy to help HIG keep the company without the burden of pension liabilities acquire.
"We believe that the defense put forward by Mr. Costley-Wood in relation to the burning platform was a construct he made up to aid his defense," the tribunal said.
Mr. Costley-Wood made no comment, said his law firm Linklaters.
The FRC said respondents were entitled to defend themselves, but said that bringing up a defense that a respondent knew was untrue undermined the regulatory system and exacerbated the original shortcomings.
KPMG said the report was "difficult to read" and accepted the results and regretted that the professional standards expected by its partners were not met in the case.
"We no longer offer bankruptcy services and have significantly improved our broader controls and processes since we did this in 2010," said Jon Holt, CEO of KPMG UK, in a statement.
KPMG will carefully reflect on the results of the tribunal in order to learn from them, said Holt.
KPMG is also under investigation by the FRC for its role in examining the collapsed construction company Carillion, and any fine from this case would likely be hefty as well.