GRC Blog Roundup: KPMG Sued for $1 Billion For Role in New Century Collapse

We usually save this for Friday or Monday, but I’ve come across a lot of very solid blog posts from around the GRC blogosphere over the last 48 hours. Thus, we are expediting the GRC Blog Roundup.

And we begin over at one of our favorite blogs, re: The Auditors, created and managed by Francine McKenna. She does a fantastic job of covering the Big 4 and the industry in general, and was recently interviewed by the Wall Street Journal as you will see when you click through to her article.

Title, excerpts, and links below, beginning with Ms. McKenna’s most recent post about KPMG being sued by New Century for $1 billion.

KPMG Has a $1 Billion New Century Problem

From Jennifer Hughes in the Financial Times:

“KPMG is being sued for $1bn by the liquidators of New Century, the collapsed subprime lender, in the first big case against an auditor arising from the current financial crisis.

In a court filing on Wednesday, lawyers for New Century’s liquidators claimed that KPMG “assisted in the misstatements and certified the materially misleading financial statements” filed by the lender. They claim KPMG was responsible for its collapse because it allowed the lender to use inappropriate accounting that led it to underestimate the provisions it needed to cover bad loans. This made its position look better and gave it access to more funds…”

…

New Century declared bankruptcy in April of 2007. KPMG resigned as New Century auditor in May 2007, shortly afterward. (Unfortunately they were still auditor for Countrywide, the other big ugly mortgage lender, until it was bought by Bank of America.) It was a tough couple of weeks for KPMG, although they were not alone in their pain. All of the Big 4 were experiencing similar pain or the anticipation that they may be tarnished by the same subprime brush.

The litigation-like activities began and the bankruptcy trustee said KPMG was still part of the problem, delaying his investigation.

And then the bankruptcy examiner’s report pointed the smoking gun at KPMG, almost a year ago to the day.

The lawsuits filed yesterday are interesting from several perspectives. I’m going to point to several areas now and expand them in later posts.

>>>read the entire article by Francine McKenna on KPMG being sued by First Century for $1 billion at re: The Auditors

Read other blog posts about this topic:

KPMG Is Sued Over New Century — (Donna Kardos at WJS.com)

KPMG Sued Over New Century Collapse — (DealBook Blog at NYTimes.com)

KPMG Sued Over New Century Audits — (Legal Pad by the National Law Journal)

KPMG sued for $1 billion over New Century work — (Mortgage Insider by Mathew Padilla)

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Compliance Policies and Email

You should take a look at your computer use and email policies to see how they address three recent cases involving email in the workplace.

The first case involves unauthorized acces: (Van Alstyne v. Electronic Scriptorium, Inc.). The president of the company had broken into an employee’s personal AOL email account. The employee had occasionally used that email account for business communications. To top off the bad behavior, the president of the company had propositioned the employee before firing her and then accessing that email account.

>>>read the entire post by Doug Cornelius at Compliance Building

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Environmental, Social, and Corporate Governance (ESG) Factors

While examining issues pertaining to corporate governance, a myopic approach is to look at the interest of the shareholders, whose interests are to be protected. On the other hand, there is a school of thought, known as the “stakeholder” approach, which calls for governance of companies with a view to protecting the interest of stakeholders in a company, which include not only shareholders, but also employees, creditors, customers and the community in general (that may be affected by a company’s business and operations). As far as India is concerned, there is something to be said about the fact that company law does cater for the “stakeholder” approach (i.e. that it requires companies to do more than maximize the interests of their shareholders). Without going into any significant detail, that the words “public interest” find mention in several places in the Companies Act is in itself a noteworthy piece of evidence.

>>>read the entire article the Indian Corporate Law blog

Tags: email compliance, KPMG, lawsuit