PCAOB And Accounting Firm Employees Charged With Misuse Of Confidential Data To Improve Firm’s Inspection Results
On January 22, 2018, the SEC announced civil charges against six certified public accountants for their role in an alleged scheme to misappropriate confidential information from the Public Company Accounting Oversight Board (“PCAOB”) relating to the PCAOB’s planned inspections of an accounting firm, so that the firm could use the confidential information to help it avoid poor inspections. Press Release 2018-6, SEC, Six Accountants Charged with Using Leaked Confidential PCAOB Data (Jan. 22, 2018). On the same day, the United States Attorney’s Office for the Southern District of New York (“USAO”) announced the unsealing of an indictment charging five of the six defendants in the SEC action with conspiracy and wire fraud for their participation in the alleged scheme. Press Release, DOJ, Five Former KPMG Executives and PCAOB Employees Charged in Manhattan Federal Court (Jan. 23, 2018). The sixth SEC defendant had previously pleaded guilty (and had agreed to settle the SEC’s claims) and is cooperating with the government’s investigation.
According to the SEC and the USAO, three of the defendants formerly worked at the PCAOB and shared confidential PCAOB information with the accounting firm’s employees. Specifically, the government claims that the defendant who pleaded guilty worked at the PCAOB until May 2015, when he was hired by the firm, and that he took confidential information from the PCAOB to the firm, including a list of accounting firms that would be inspected later in 2015. This list was allegedly viewed by three other employees of the firm, all of whom are defendants. The fifth defendant, another former PCAOB employee, allegedly provided confidential information to the firm while she was both working on the PCAOB team assigned to inspect the firm and actively seeking employment with the firm. After the firm hired her, she allegedly persuaded the sixth defendant, who at the time was also an employee of the PCAOB, to share additional confidential inspection information about the firm. The defendants who worked for the firm allegedly used the confidential inspection information to adjust the results of audits that were set for inspection by the PCAOB, thus preventing negative inspection results.