Four former audit partners and one former KPMG manager, along with a former PCAOB inspector face charges involve conspiracy and wire fraud. None of the individuals remain employed by KPMG or the PCAOB. The firm was unde rpressure because of a high level of audit deficiencies found by the PCAOB in 2014.
It was alleged two former KPMG partners, David Middendorf and Thomas Whittle deliberately recruited Brian Sweet, an associate director in the PCAOB inspections group from March 2014 until April 2015. Sweet, who became a partner in the KPMG Department of Professional Practice, was asked to provide confidential information even before he began his new job and copied files related to future inspections on his last day with the agency.
According to the indictment, Middendorf, then KPMG's National Managing Partner for Audit Quality and Professional Practice, pressured Sweet from the start, allegedly telling Sweet to remember where his "paycheck came from and to be loyal to KPMG." Middendorf served on the board of directors of KPMG LLP from 2009 to 2014.
The firm followed its recruitment of Sweet by hiring Cynthia Holder, a PCAOB Inspections lead. Holder campaigned to get a job but after being contacted a by KPMG she lied to the PCAOB ethics office, telling them she was not interested in a position. That enabled her to remain involved with plans for KPMG inspections.
Holder become an Executive Director in KPMG's Department of Professional Practice group in August 2015 until leaving the firm in April 2017.
Holder stayed in contact with her friend, Jeffrey Wada, an Inspections Leader at the PCAOB from February 2012 until February 2017. Frustrated over being passed over for promotion, Wada campaigned for a KPMG position and leaked PCAOB information.
The justice department accused David Britt, leader of KPMG's Banking and Capital Markets Group until February 2017, with sending an email in 2015 requesting confidential PCAOB information.
Britt was also accused of concocting a false explanation for a "re-review" program, which the indictment says, "allowed KPMG to double-check its audit work, strengthen its work papers, and, in some cases, identify deficiencies or perform new audit work that had not been done during the live audit."
Mittendorf, Britt and Whittle were each indicted on charges of conspiracy to defraud, conspiracy to commit wire fraud and three counts wire fraud. Holder and Wada each face the same charges expect they were indicted on two counts of wire fraud.
Sweet was indicted separately and will be tried by a different judge than will be the others.