HP CFO Cathie Lesjak didn't even read KPMG's Autonomy due diligence before $11bn biz gobble Cathie Lesjak, HP’s former chief financial officer, told the High Court in London this week that she did not read a KPMG due diligence report on British software firm Autonomy before her company blew $11bn buying it. Barrister Robert Miles QC asked her: “I think you didn’t, yourself, read a due diligence report prepared by …
"Figures look fairly solid to me"
I just skimmed through the executive summary and what really stands out is that KPMG basically say "we had no access to any official documents other then publicly available ones, and all the other information is on the basis of whatever they told us".
What's even more astounding is that according to KPMG this is the normal for any takeover, and that it's quite usual for the true picture to only be known post-acquisition.
So what's the effing point of the due diligence exercise then? HP might as well have asked Autonomy 'pinky swear that you're really worth $10bn'?
Do they? $193 in deferred revenue that KPMG estimated at 66% write-down? That strikes me as not exactly "solid".
KPMG also flagged extremely complex contracts with non-deliverables, accounting for VAR revenue on a sell-on rather than sell-through basis, and lack of access to tax information despite multiple requests, which they said should be pursued for the final report.
And they noted the hit on revenue from HP itself and from competitor OEMs.
And there was a lot of "based on management estimate" and similar language, which would certainly make me uneasy if I were thinking about dropping $10B on a new shiny.
And then there are the usual IFRS-vs-GAAP things, like capitalization of R&D. Though the preliminary report doesn't show much of a potential hit from those, of course. And it similarly dismisses the big revenue valley circa 2010 as a change in how capital was managed. Still, look at how far EBIDTA was off its 5-year peak, and at the number of places where they note declining IDOL revenues.
And there's Autonomy's business model of growth through acquisition, then discontinuing the acquired products in favor of IDOL. Even if IDOL is unquestionably superior than whatever you're using at the moment, that's going to lead to some bad feeling. What's more, for our purposes, it let Autonomy management tell KPMG (as they say in the report) that it's impossible to evaluate the success of the acquisitions, because once they were integrated they stopped selling the acquired products.
I'm very much not an accountant, so I have no idea whether anything in all that is considered shady. And I certainly think there's ample evidence that HP fucked up the integration. But the valuation still looks much too high to me, and the preliminary report doesn't make me feel any better about Autonomy's state before the acquisition.
(Now that we own IDOL and what's left of Autonomy, I have nothing but good wishes for those folks. I've seen a couple of presentations and I'm inclined to believe there's some good tech there. But I don't think much of the boards and C-suiters involved in the HP-Autonomy deal.)
I'm officially over the guilt of having skimmed some paragraphs of the last ISP contract I signed. Total commitment? About $30K over three years.
Seriously, does anyone in the C-suite do their job AT ALL in these large megacorps? Guess they're just too busy watching the the bank balance grow while they plan their next vacation.
Seriously, does anyone in the C-suite do their job AT ALL in these large megacorps?
Doubtful. I'm not even sure some of them could if they tried. This particular case though, looks to be the worst example I've ever seen - the CFO not reading the numbers on an $11 Billion takeover? If negligence was criminal, this should deserve the highest penalty.
KPMG basically talked to people at Autonomy and compared what they said to public records.
Numerous times they state they were given very little access to proprietary financial and tax information, so the details of Autonomy's financial reality was only as verified as the public lipstick.
A marriage meant for Vegas, but maybe not Wallstreet.
Kudos for getting the WIP document.
Reading the document, it does not seem to be a 11bn buy. Almost a 35x cap rate? really? (or 2.85%)
I am impressed by the CFO saying that she did not read the document. WTF, how is she going to say that she did not mismanage this?
She did try to prevent the deal from proceeding.
It's disappointing that Lesjak didn't read the prelim report, but she was already opposed. It's not like the report would have changed her position. And it sounds like Leo was determined to go ahead regardless of what anyone else said.
P.19 makes it clear that the Due Diligence is incomplete at least from a tax perspective (although why they haven't got "DRAFT" as a watermark all over it?).
P.26 talks about UK/US GAAP differences in particular relating to revenue recognition for multi-year deals, and p37-39 quantify some of the other differences
P67-71 lists areas where KPMG's work was not yet completed (in bold).
If Lesjak or anyone else at HP had read this then surely they would have at least told Apotheker to wait for the final report to be digested by the Finance minions - even as an arse-covering exercise?
If KPMG could not complete their work then that should have raised alarm bells, and I can't understand why KPMG have remained quiet in this (maybe due to their SOW with HP and general client confidentiality - they would rather stay out of this as their report was never finalised and was fairly heavily caveated).
To be fair, the report isn't saying anything scary. It's saying that UK takeover practise normally means that the buyer gets less info than in the US - something I assume KPMG know, as I didn't. But it's not flagged up anything material, they're just talking about differences in tax treatment, capitalisation of R&D and booking of future deferred revenues - which is treated differently under GAAP and in HP's accounts.
Also, they're not suing Autonomy's auditors - so the reported figures can't be that badly wrong.
The claim is that profit margins were actually lower than claimed, because Autonomy were mixing hardware (low margin) and software sales - but they had the profit margins for the overall trading - so that doesn't seem to hold water.
The only thing I noticed from the report is that Autonomy had sold a bunch of permanent licences, and were trying to move customers to a cloud SaaS model - for lovely ongoing revenues.
So the only thing I can think they might claim is that Autonomy had made almost all the sales it was ever going to, and there was no more money to make from the business. But that mix of licenses is in the report, and surely HP understood the market for the products they were buying Autonomy for?
I could be misremembering, but isn’t this the one that said she was against it but got outvoted? Hard to say her opinion would have changed much by reading the report then. Only thing is maybe she’d have been able to make a better case to get someone to listen to her.
I recall reading somewhere in the myriad of documents (which I now cannot find) that Cathy Lesjack had 3 key concerns about the deal:
1.) that the funding cost would badly impact their credit rating, down likely to BBB- or at best BB+
2.) the negative reaction of shareholders to the deal
3.) the most damning - that HP had a terrible track record when integrating previous acquisitions and, by inference - why would this acquisition be any different?
I have also read the Deloitte audit reports from the years around the purchase and the issue of the disputed hardware sales is clearly covered and discussed at length. From memory Autonomy had the costs under Marketing Expenses, and Deloitte had queried this but were persuaded by Autonomy that this was the correct place due to their plan to develop a long term relationship with Dell(?) as a preferred hardware supplier. Regardless, if you read their published accounts the issue of hidden hardware sales is a complete load of rubbish.
There is much talk about HP being keen to close the deal ahead of Oracle and rushing everything. Have they never heard of exclusive bidding rights? pay a small premium to have sole access to the books etc. for a period long enough to complete due diligence properly.
Another thing I don’t understand is why this needs such a long drawn out court case to resolve:
- HP allege fraud
- HP provide all the documentary evidence needed to demonstrate how they were defrauded and the calculations leading to the size of the post acquisition write-down
- Autonomy provide evidence showing that HP had all the information and time they needed to be able to determine the fair value of the business and thus HP were not victims of fraud
- the judge weighs up all the evidence and makes a decision.
Finally, I (like many) cannot see what value these senior HP witnesses are adding to their case: to a fair minded observer they seem to be as intent on destroying their own case now as they were in acquiring Autonomy in the first place.
It is fascinating to watch it happening though.
In the same way rubberneckers slow down to look at the aftermath of a car crash.
I don't think that's fair. For one, by reading about the trial we're not interfering with people who don't want to read about it, so we aren't nearly as vile as rubberneckers. For another, unlike in an auto accident, there's good reason to believe that all the principals are at fault in this case.
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Just for comparison of the sums that Silicon Valley regularly spunks on acquisitions: IBM's recent slurp of RedHat (10x revenue), Microsoft's bidding war with itself over Skype and Facebook's $ 20 bn "pocket change" purchase of WhatsApp.
Public companies are given enormous leeway for these kind of transactions and it is for the shareholders to decide if the approve of the actions of the board, which makes proving allegations like this of fraud all the more difficult.
'We cannot verify'... 'complex payments structure'... 'limited disclosure.... in accordance with UK law.', 'core profits falling...', 'reporting policy not in accordance with HP policy'...
To me, speaking as an uncertified total ignoramus, it looks like HP were warned 'the numbers will probably look very different if you do it like expect do,' that they were buying a pig in a poke, caveat emptor needed to apply, etc, and they listened just as well as the average teenager with his/her mind on the telly.
And teens never ever say "No-one ever told me!"
But it also looks like the company were doing OK before HP got involved. Teenagers never ever break things, do they?
As another uncertified total ignoramus, the headline page seems to be filled with interesting facts that need more investigation. I on't claim to have read the document in depth or understand the difference between UK/US accounting standards or tax.
The red flags that will likely harm HP's case for "fraud" versus lack of due dilligence:
- "Target has made a number of acquisitions. A significant portion of the revenue growth is due to acquisition." Given the raid pace of acquisitions and a bedding down period post-aquisition, I think HP will struggle with some of its revenue estimate claims without good supporting evidence.
- "Target capitalizes R&D expenses in accordance with IAS 38. Post-acquisition, it is likely that the majority of this expense will not qualify for capitalization under U,S, GAAP" So there will be a legitimate revenue drop if HP aquires Autonomy.
- "The fair value of Target’s investment in Blinkx is currently about $25 million less than the book value ($95 million)." Another revenue drop...
- "Target has deferred revenue at June 30, 2011 of $193 million. In acquisition accounting this balance will be fair valued. Our preliminary estimate is that the fair value may be about $60 million." A revenue drop based on fair-value - the difference between the claimed amount and fair value would require further investigation to identify what HP expected.
- "Target stated that HP is a significant customer. The data provided suggested sales to HP exceeded $10m between 2006-2010." Does this hurt HP's claim that Autonomy was software only?
- "Capitalization of R&D expenses: Target capitalizes more cost than is permitted under U.S. GAAP. The net impact is $21 million in 2010." Revenue drop...
- "Target capitalizes certain research and development costs under IAS 38. Under U.S. GAAP the majority of these costs would not qualify for capitalization and would be expensed as incurred." Revenue drop...
- "here is a difference in revenue recognition policy between Target and HP around payment terms. Under HP policy, for customers with payment terms in excess of 90 days, revenue is deferred until it is collected. This will result in less revenue being recognized than under Target’s policies; however, we do not have sufficient data to determine the impact on an annual or quarterly basis." Revenue drop AND may explain HP's immediate unhappiness with Autonomy performance.
There's an awful lot of revenue adjustments in that, some from acquisitions and many of which ONLY apply if HP acquire Autonomy.
In terms of valuation of Autonomy, the number of acquisitions and the state of integration would need more investigation - that alone may identify significant differences in revenue models without any actual fraud (i.e. estimated revenue models used for acquisition pricing versus subsequent performance and loss of key customers/staff due to acquisition).
It will be interesting to hear details of the post-acquisition financial integration which resulted in the fraud being discovered. No one seemed to care for the details before acquisition but suddenly HP saw fraud everywhere and the due diligence states "Presented are potential quality of earnings adjustments that you could consider in your valuation model."
That valuation model would be interesting - particularly with initial estimates followed by the due-diligence numbers and then HP's final model they used for the write down. What if the initial model was wildly inaccurate and the due diligence numbers, while incomplete, was close to the true value making Autonomy was a dead duck for HP?
What if everyone "not paying attention to anything" is just convenient memory loss to cover for HP not understanding the mess they were getting themselves into by buying a UK company operating under different accounting rules, without due diligence being carried out properly and then crying that they were defrauded? And when they struggled to prove genuine fraud, they leant on a US sales exec to confess on the condition he got off to "remember" things?
My guess is KPMG have a rate based on the size of the deal and the speed that they wished to complete the due diligence. The due dilligence is likely to be part of a larger package covering tax, legals, financing, post-acquisition integration etc which is likely to be in the £10m+ range based on the value of the deal, but for what were are looking at, I would guess ~£1m rising to £2-3m if it included tax. Most of that will be based on day rates of a large team providing 50-100 days of effort.
From the Guardian report on the actual due diligence work, as you say, it was a few conference calls and no access to Autonomy books before HP said "buy, buy, buy". KPMG's response at the time was"we do not have sufficient information to provide an opinion".
KPMG didn't provide a qualified statement/signed report, so I'm guessing they didn't complete their work. I'm assuming KPMG part billed, made it clear to HP that they had screwed up and KPMG were riding out of Dodge on the next horse, and if HP questioned KPMG's professionalism, KPMG would provide HP shareholders with all the information they wanted....
It would be interesting if KPMG were brought in as witnesses for the defence.
As for the ex-CFO - I'm disappointed. I thought Lesjak was the one brave, smart, competent person on the board. Being "not quite as bad as the others" isn't much of a claim to fame.
And Meg Whitman claimed that losses had been quantified. So, perjury and slander charges to be lodged against her? Or is this just more CEO-blindness?
I'm no fan of KPMG but I'm finding it hard to find grounds for this assumption based on current evidence offered : "I'm assuming KPMG part billed, made it clear to HP that they had screwed up"
My initial reading of this report suggests that KPMG had to produce it to a tight deadline. The amount of caveats and highlighted text that is in it suggests that they weren't given time to complete it as you would have expected for an $11bn purchase, and they have therefore tried to call out a lot of that concerning stuff as best they could. It's all there in the report, you just need to read between the lines somewhat.
As I said, I have no particular love for KPMG, but from what I have read about how HP have handled this overall, it seems like their mind was already made up to buy Autonomy, with the diligence just being a procedural box ticking exercise. I'd be surprised if any of this comes back to haunt KPMG particularly, and I assume that is why they have not [as far as I am aware] been called to give testimony as an expert witness.
I'd be interested in HP having to state the dates and length of the KPMG engagement. I'm sure that would tell a fair tale in itself.
As a former public company CFO there were comments on page 13 and 24 regarding revenue recognition which if HP had really read the document should have caused them to ask a number of questions. But if you don't read it and don't ask the questions to enable you to better understand where the revenue is coming from, you have no one to blame but yourself. KPMG wasn't given the time and possibly not the budget to do a detailed review. HP got the report that they paid for and then didn't bother to look at it and ask the questions that jump out.
She opposed the deal but was ignored without reading the document. One can do due diligence with the use of a worthless insultant. A good bit of the information will be public record anyway as required for listing on a stock exchange. Some more can be gotten by quietly asking around the industry what others know about X. So I am not sure that reading the lies cobble together by the insultant would gain you anything if you have already found some serious issues to be concerned about.
Which then can't be dismissed by anyone else who hasn't read the report
Sure they can. Being able to mount a better argument is not the same as being able to mount an incontrovertible one.
If anything, human history shows there has never been an incontrovertible argument. You can always find someone to contradict it. There are plenty of people who will deny tautologies.
"That's what Apotheker is coming across as: "I want!!! I want!!!!!!!!!! I'll hold my breath till I turn blue if you don't!!!!!!!""
Because of how he had to fight against all the boardroom opposition?
At the moment, the only opposition to HP doing this deal from within HP was from Lesjak. While her testimony comes across as a little weak, she is supposed to be helping HP rather than burying them and on reflection, she may think she could have done more.
While Leo said she disagreed with him on the purchase, there's no mention of other board members supporting Lesjak. Combined with Meg leaning heavily on her post-acquisition, she may feel conflicted but she has retired and this is behind her.
All guesses, but I wasn't expecting her to attack her colleagues and am cautious about what she might achieve in offering information unprompted.
"Its worth noting the Shossovan the CFO who has already been found guilty in the US appears to have had most of his defence evidence thrown out. and he's accepted a sweetheart deal with minimum time
and minimum fine in return for stuffing up the other Autonomy C-suites."
Hussain was effectively convicted of multiple counts of wire fraud for sending multiple copies of Autonomy's accounts via e-mail to HP. His defence team argued that e-mailed accounts didn't amount to securities fraud, but this defence was rejected.
I'm aware there was one case of the US sales office back dating a sale to a previous quarter to increase revenue, and I believe it met the US standards for fraud, but it wasn't clear that Hussain was directly involved or just copied on an e-mail, although failing to take action may have been sufficient. I'm assuming the evidence of the e-mail was presented in court rather than just relying on two witnesses statements (Egan and Baiocco), based on how reliable their testimony appears in this case.
Regarding the conviction, once the defence failed, I suspect Hussain took the easiest option available.
It's the US - guilt is something you agree to in court, not necessarily a reflection of the charges.
Most of the report relies on "management told us". And management told us that they effectively met US accounting standards.
I wasn't sympathetic with the US 'illegal under our standards' prosecution, but it looks different if management was actually claiming to have substantially met US standards.
Management did substantially meet US standards. GAAP accounts for capitalisation of R&D differently, US tax rules are different to UK ones (though the report says that most US taxes could be offset against UK ones anyway) and the report states that Autonomy accounted for deferred income in a way that HP rulles (and possibly GAAP) don't allow.
That doesn't mean those things are wrong, just different. For example the report states that Autonomy don't write-off revenue that they believe may still be collectible - and leave it on their books at full value, rather than a written-down fair value. However they also have a bad debt provision on the books.
So long as the provisions cover the bad debts - this is a perfectly legitimate way to account for the uncertainties of collecting them - and your balance sheet will add up to the same amount either way.
"I wasn't sympathetic with the US 'illegal under our standards' prosecution, but it looks different if management was actually claiming to have substantially met US standards."
The way I read KPMG's report is that Autonomy were largely doing things correctly BUT (and it is a very big but) if the US revenue was for a US company (i.e. HP) there were a number of things that could no longer be done due to different accounting standard/tax codes/etc.
Think of it like the amount of tax paid by Starbucks/Apple in the UK only in reverse - a large proportion of the revenue is for intellectual property that is paid to the companies country of origin rather than taxed as profit where it is earned. Given that the around half of Autonomy's revenue was from the US, this would be a significant consideration for a US company carrying due diligence.
It makes clear HP knew Autonomy sold hardware. Who knows what ‘limited situations’ means. I guess they didn’t ask...
“In limited situations, Target will ship its software pre- installed on hardware to its customers. Target recognizes revenue for the hardware in conjunction with the software license, when it is delivered.”
Absolutely - if the hardware component is not material to the revenue numbers (obviously definition-dependent!) then it’s not a great crux to an argument for HP.
If this was really a material problem for HP post-acquisition then surely it should have been one pre-acquisition too - if someone had dug into the report.
“It makes clear HP knew Autonomy sold hardware”.
Yes, it was reported to HP on page 24 in plain English. The report is also a proof that Autonomy management disclosed that fact to KPMG. Where is the fraud then?
Perhaps that explains HP top brass claims that nobody have read the due dilligence report but a few HP clerks? For a $12 billion acquisition? Do anyone believe it?
Having worked for a multi billion dollar US corp a few years ago, if the CEO wants to do something, it's not sensible to question it or provide information to suggest it's not a good idea. Their decision is supposed to be based on their years of experience which is why they take home a base salary of $xxm so by suggesting the deal is not all it might be you are also suggesting their judgement is not all it might be. Off with your head !
>but the other senior execs will usually have some sort of audit trail saved up (for the blamestorming meetings) in case it ended up in a steaming heap!
Not just the execs, from my time in the 90's when I had to deal with international board politics, I quickly learnt to keep sealed brown envelopes of relevant correspondence etc. in someone elses garage...
What I don't see is how HP can claim it wasn't worth $11bn. Something is worth what someone else will pay for it - HP were prepared to pay $11bn for it, therefore it was worth (in HPs eyes) $11bn.
If HP chose not to look inside the bag before parting with cash, well more fool them. It does sound a bit like the Autonomy folks just held up the bag and let HP assume it was a pig inside, and KPMG didn't get as far as checking the contents before HP handed over the cash.
As a bitter former "professional advisor": because that's what the client wants. No-one ever reads the fucking reports in which you painstakingly explain what you've found, how you reached that conclusion, and what it means. People can barely be bothered to read the one page executive summary for a $200,000 piece of work. And these are the bastards who are running the companies in which your pension funds are invested!
This is just nuts:
Page 9
- Management estimates the underlying organic growth to be about 15% to 17%
-Target has maintained a consistent gross margin since 2009. Target expects the gross margin to decline slightly in the future with the growth in the hosting business
-Free cash flow after interest and tax is estimated to be slightly more than $200 million in 2011.
Page 14
-Target’s organic growth rate has declined in both its core business and overall business
- Target includes the results of its acquisitions in its organic growth calculation immediately after acquisition.
Page 16
- Target has $193 million of deferred revenue at June 30, 2011. The balance at closing is estimated to be a similar amount.
- Management did not provide detailed information to support the fair value estimate. As such, we have based the calculation on aggregate data and market comparables.
The hosting offer was growing but so was the capex to support the hosting.
------------
so...
- it is a profitable company
- growing about 17%pa and possibly slowing
- gross margins likely to fall
- red flags over acquisitions (not exceptional at the time tbf)
- red flags over deferred revenue (not exceptional at the time tbf)
as to the value...
I am not sure what an appropriate valuation metric would be but back in '11 the price - fcf ratios were
microsoft 3
apple 4
ibm 5
opentext 6-7 (competitor at the time)
unilever 8
autonomy
12,000m / 200m = 60 - clearly nuts
To me it seems HP management thought they knew something the world did not and paid $12bn for a ~$1-2bn co
- and later on it turned out they did not, and that made them sad.
KPMG cutting through complexity™
“The objective of our engagement was to assist you with your assessment of the risks and opportunities of your proposed investment in Target.”
“There is a risk that post-acquisition, Target’s VSOE studies are insufficient for your purposes which could result in some elements being recognized on a ratable basis.”
“Our view is therefore that the transfer pricing risk arising from the application of a 3.5% OM for routine distribution activities is relatively low.”
“Provided the above summary of facts is accurate, our view is that the risk arising from the allocation of a routine return to the U.S. Group only is relatively low.”
“In our experience, it would be difficult for tax authorities to produce stronger evidence than that provided by management as to the most appropriate data and/or interpretations to be used in performing the value contribution analysis. However, this should nevertheless still be regarded as an area of transfer pricing risk.”
Around the time of the deal I was working at a place that was using Autonomy's software for the search functionality of the website. They had been users of the software for years, from when it was called Verity. Whenever I needed to find something on the site I just went to Google because I could never find anything with the site's own search. It was that bad. Can't blame the people looking after the software as they brought in consultants from Autonomy to set everything up. The website search was behaving like it was supposed to.
The place even sent me on some training from Verity/Autonomy. In the course they were using the US website of Best Buy as a wonderful example of their software. In the course I was playing around with the search on Best Buy's site and I remember I would search for an item, bring up the page for that item, search for something specific about the item such as the model number, and the search would return no results.
If HP just performed some searches with Autonomy's software they would have realized that any amount of money was too much to buy that company.
Isn’t the biggest red flag just this statement:
"Target has made a number of acquisitions. A significant portion of the revenue growth is due to acquisition."
That makes it logically self-contradictory to acquire. Much / most of Autonomy financially is claimed to be just a middleman to previous acquisitions.
If you believe that you are good at acquisitions, strategically first, followed by integration execution, then acquire the small fry directly. It makes no sense to pay a premium, and way over book, for the expertise of a middleman management that you will shove aside post acquisition. At best, why not just headhunt the current Autonomy management, if you think they are that good.
But if you have historical evidence that you are not great at acquisitions, as claimed by CFO, then why proceed this time?
It’s no good shouting down the CFO and claiming they are great, because that just falls back to the first point.
Set the wayback machine to 2012, when the following bits of seemingly well-informed bloggery were first posted:
http://uneasyempires.blogspot.com/2012/11/autonomy-on-trial-what-i-saw-in.html
I've posted about that one before. This one, maybe not:
http://brontecapital.blogspot.com/2012/11/hewlett-packard-and-autonomy-notes-from.html
"The topic: how to fake your accounts from the perspective of the fraudster (and hence how as an investor to tell if a company is faking its accounts).
At the end I suggested that even if you were right and the company was a fraud you could still short the stock and lose money - someone with deep pockets might buy the fraud. The example I gave was Autonomy which was purchased by Hewlett Packard.
Yesterday Hewlett Packard admitted that Autonomy was a grotesque fraud. They wrote off most of the purchase price."
And there's more.
Share and enjoy.
https://uk.reuters.com/article/uk-kpmg-usa/kpmg-fined-50-million-for-using-stolen-data-exam-fraud-u-s-sec-idUKKCN1TI1PM (17 June 2019)
WASHINGTON (Reuters) - KPMG LLP has agreed to pay a $50 million (£44 million) fine over allegations former staffers used stolen information to alter some of the accounting firm’s previous audit work and cheated on training exams, the U.S. Securities and Exchange Commission said on Monday.
KPMG admitted to the SEC’s allegations and agreed to hire an independent consultant to assess the firm’s ethics and integrity controls, as well as its compliance related to abuse of the exams issued by the Public Company Accounting Oversight Board, the SEC said in a statement.
The fine was one of the largest ever imposed on an auditor by the SEC.
“The breadth and seriousness of the misconduct at issue here is, frankly, astonishing,” said Steven Peikin, one of the SEC’s enforcement directors. “This settlement reflects the need to severely punish this sort of wrongdoing while putting in place measures designed to prevent its recurrence.”
[continues]"
https://uk.reuters.com/article/uk-kpmg-accounts-fine/uk-audit-watchdog-proposes-record-125-million-pounds-fine-for-kpmg-idUKKCN1SR21S (21 May 2019)
"LONDON (Reuters) - Britain’s accounting watchdog has proposed fining KPMG 12.5 million pounds for errors in checking whether BNY Mellon bank was complying with rules for safeguarding client assets.
The Financial Reporting Council (FRC) said it has asked an independent disciplinary tribunal on Tuesday to levy the fine, a record for the watchdog if confirmed.
KPMG and one of its partners admitted to serious failings last September, and tribunal hearing was limited to sanctions. "
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