The British financial watchdog penalized KPMG £13 million for a ‘very alarming’ conflict of interest in August. Silentnight, a bed and mattress maker, was allegedly forced into bankruptcy by KPMG in 2011 in order for HIG, a private equity firm, to purchase the company. The £100 million pension fund could not be taken up by HIG Capital due to Silentnight’s bankruptcy. Silentnight’s 1,200 pensioners, the majority of whom were manufacturing workers, have lost an estimated £50 million due to the scheme’s transfer to the Pension Protection Fund. Despite the fact that HIG’s interests were “diametrically opposite” to KPMG’s client, Silentnight, the FRC determined that KPMG had acted in HIG’s best interests.
Because they did not disclose evidence to investigators at the Financial Reporting Council, the disciplinary court determines that KPMG and David Costley-Wood, the senior partner who led the advising on Silentnight, did not participate in the investigation (FRC). It is the first time, according to the financial reporting watchdog, that a corporation has attempted to deceive the regulator during a disciplinary process. KPMG allegedly neglected to notify the FRC about a £45,000 Silentnight charge for services done before the formal contract was signed. This is ‘impossible to understand,’ according to the disciplinary judge, and the court also found it difficult to accept that this had been overlooked inadvertently.
Commenting on the ruling, KPMG said it acknowledged the tribunal’s findings and regrets that standards were not met. While it no longer provides insolvency services, KPMG said its “broader controls and processes have evolved significantly since this work was performed over a decade ago”.
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Source: riskcompliance.biz