Former KPMG partner to plead guilty in insider trading case

A former senior partner at accounting firm KPMG’s Los Angeles office has agreed to plead guilty to securities fraud for passing inside information about the firm’s clients to a friend, who used it to make more than $1 million in profitable stock trades.

Scott London, 50, who supervised more than 500 KPMG auditors, agreed Tuesday to plead guilty to the single felony charge. The date he will enter the guilty plea has not yet been scheduled.

London’s stock-trading friend, an Encino jeweler named Bryan Shaw, pleaded guilty to conspiracy last week.

Both men have acknowledged that London gave Shaw sneak previews of company earnings reports and told him about acquisitions involving KPMG clients before they were made public, and Shaw used the information to make profitable trades.

The charge to which London has agreed to plead guilty carries a potential sentence of 20 years in federal prison, but he would likely receive significantly less time because he has no prior criminal record.

Shaw has admitted that he gave London tens of thousands of dollars in cash in exchange for the inside information about KPMG’s clients. According to court documents, Shaw also said that he typically arranged to meet London on a side street near Shaw’s business so that he could give London bags containing $100 bills wrapped in $10,000 bundles. Shaw also said that he gave London a $12,000 Rolex Daytona Cosmograph watch, as well as jewelry and concert tickets, in exchange for the confidential information.

“Over the course of several years, Mr. London secretly fed confidential, insider information to a man he knew would use that information to make trades,” said U.S. Attorney André Birotte Jr. “Behavior like this is an affront to people who follow the law and compromises the public perception in the inherent fairness of the markets by creating an uneven playing field. As a result of his illegal conduct, Mr. London has agreed to plead guilty and will face a lengthy prison term.”

London’s attorney, Harland Braun, could not be reached.

KPMG resigned as auditor for two of the involved companies, Herbalife Ltd. and Skechers USA Inc., after learning of London’s misdeeds. Both companies have hired new auditing firms.

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