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Bad-boys: Details of rogue KPMG’s other multibillion dollar scandals across the world

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Troubled auditing firm which made $26billion in 2017, could see their revenue shrink this year, as they lose several clients and could possibly face fines as the South African scandall fully unravels itself

“It’s not the first time a company has dropped them (KPMG) and I suspect it won’t be the last time,” said Wayne McCurrie, a money manager at Ashburton Investments Management Co in regard to Barclays Africa’s booting of beleaguered rogue auditing firm. He further told Bloomberg: “There’s going to be some job losses because KPMG has lost so many clients and they are probably going to lose more. They aren’t getting new clients.”

Looks like McCurrie is spot-on, given that over the last few months, the firm has also lost,  listed clients that among others, include fashion retailers, The Foschini Group Ltd as well as Sasfin Holdings Ltd a financial services firm as well as consumer-goods distributor AVI Ltd.

But that did not perhaps hurt like the April 2018, ban by the South African government on KPMG from auditing public institutions.

Now the latest ban by Barclays Africa which has presence in 18 other African countries is likely to set-off a chain of other bans from, first the other 5 banks KPMG audits in South Africa as well as many other multinationals across the continent.

And that will hurt.

Barclays Uganda’s Premier Life Centre: Because of the Barclays Africa Group ban, KPMG Uganda can no longer do business with Barclays Uganda, one of the top 5 banks.

Background to KPMG troubles in South Africa

Beginning last year, it was discovered that KMPG that had been working with a Gupta family company in the mining sector, Oakbay Resources and Energy, for 15 years, was involved in collusion and subsequently massive corruption.

KPMG troubles were made worse by a 2015 report by the firm that implicated former Finance Minister Pravin Gordhan in the creation of an illegal intelligence gathering unit of the South African Revenue Service (SARS). This report was interpreted to be a vendetta by the Gupta Family and a ploy to get rid of Gordhan who was now becoming a stumbling block to the notorious Guptas.

The report was later withdrawn by KPMG in September 2017.

After an internal investigation that found work done for the Gupta family fell “considerably short” of the firm’s standards and amid rising political and public backlash, KPMG’s senior leadership in South Africa, including its chairman Ahmed Jaffer, CEO Trevor Hoole, COO Steven Louw, and five partners, resigned in September 2017.

Save South Africa, a civil-society group, accused KPMG and UK PR firm Bell Pottinger of playing a “central role in facilitating state capture” and consequently four firms fired KPMG before the government too weighed in with a heavy slap.

Timeline: KPMG no stranger to scandal

It appears, KPMG that was recently fingered as conflicted over an ongoing investigation regarding the controversial sale of Crane Bank by Bank of Uganda, it appears has a string of scandals all over its back and has paid over $1 billion since 2003 to cover up for its mess.

2003: KPMG LLP was found guilty by the Internal Revenue Service (IRS)- the tax body of the United States federal government and the US Justice Department for creating fraudulent tax shelters to help wealthy clients avoid $2.5 billion in taxes between 1996 and 2002, and agreed to pay $456 million in penalties to avoid indictment.

2003: KPMG agreed to pay $125 million and $75 million to settle lawsuits stemming from the firm’s audits of Rite Aid and Oxford Health Plans Inc., respectively in the US.

2004: KPMG agreed to pay $115 million to settle lawsuits stemming from the collapse of software company Lernout & Hauspie Speech Products NV, still in the US.

2007: KPMG Germany was investigated for ignoring questionable payments in the Siemens bribery case and in November 2008, the Siemens Supervisory Board recommended changing auditors from KPMG to Ernst & Young.

2008: KPMG was accused of enabling “improper and imprudent practices” at New Century Financial, a failed mortgage company and KPMG agreed to pay $80 million to settle suits from Xerox shareholders over manipulated earnings reports.

2008: In December 2008 it was announced that that two of Tremont Group’s Rye Select funds, audited by KPMG, had $2.37 billion invested with the Madoff “Ponzi scheme.” Class action suits were filed.

2011: In August 2011, KPMG conducted due diligence work on Hewlett Packard’s $11.1 billion acquisition of the British software company Autonomy. In November 2012 HP announced an $8.8 billion write off due to “serious accounting improprieties” committed by Autonomy management prior to the acquisition.

2013: In April 2013, Scott London, a former KPMG LLP partner in charge of KPMG’s US Los Angeles-based Pacific Southwest audit practice, admitted passing on stock tips about clients, including Herbalife, Skechers, and other companies, to his friend Bryan Shaw, a California jewelry-store owner.

2015: In 2015, KPMG was accused by the Canada Revenue Agency (CRA) of tax evasion schemes: “The CRA alleges that the KPMG tax structure was in reality a ‘sham’ that intended to deceive the taxman.”

2016: In 2016, the Canada Revenue Agency was found to have offered an amnesty to KPMG clients caught using an offshore tax-avoidance scheme on the Isle of Man.

2017: In 2017, KPMG terminated five partners in its audit practice, including the head of its audit practice in the US, after an investigation of advanced confidential knowledge of planned audit inspections by its Public Company Accounting Oversight Board. This followed criticism about KPMG’s failure to uncover illegal sales practices at Wells Fargo or potential corruption at FIFA, the governing international body of soccer. It was reported in 2017 that KPMG had the highest number of deficiencies, among the Big Four, cited by its regulator in the previous two years.

2017: In 2017, KPMG paid a $6.2 million fine to the US Securities and Exchange Commission for inadequacies in its audit of the financial statements of oil and gas company, Miller Energy Resources.

2017: In November 2017, 91 partners of KPMG faced contempt proceedings in Hong Kong High Court, as China Medical Technologies (CMED) liquidators investigating a $400 million fraud took action against KPMG with regard to its refusal honor a February 2016 court order to produce Chinese working papers, correspondence, and records to the liquidators.

2018: In January 2018 it was announced that KPMG, auditor of collapsed UK construction firm Carillion, would have its role examined by the Financial Reporting Council, and it was summoned to give evidence before two House of Commons select committees on 22 February 2018.

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