SEC Sues Former KPMG Partner for Insider Trading

SEC v. Scott London and Bryan Shaw, Case No. CV 13-02558 (C.D. Cal.).  On April 11, 2013, the SEC announced it filed insider trading charges against former KPMG partner Scott London and his friend Bryan Shaw.  The SEC alleges that London gave Shaw nonpublic information over a period of 18 months.  London passed the inside information by cell phone but on one occasion London give Shaw nonpublic information in the presence of others during a golf outing.  According to the SEC, London was the lead partner on the KPMG audits of Herbalife and Skechers USA, and he was the firm’s account executive for Deckers Outdoor Corp.  As a result, he had routine access to material, nonpublic information about these companies before they released their financial results. Shaw traded numerous times on the inside information he received from London.  He grossed profits of more than $714,000 from his trading.  The SEC alleges that London also gained access to inside information about impending mergers involving two former KPMG clients – RSC Holdings and Pacific Capital and tipped Shaw with the information.  Shaw made nearly $192,000 by purchasing RSC Holdings stock right before its merger announcement.  He also made more than $365,000 by purchasing Pacific Capital securities prior to a merger announcement.  Shaw gave London bags of cash, a Rolex watch, and several pieces of expensive jewelry.  The SEC charged London and Shaw with violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.  The SEC seeks
injunctive relief, civil monetary penalties and disgorgement.

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