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SEC LITIGATION RELEASE
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EXTRACTED KEY WORDS
ACCOUNTING KPMG PARTNERS FINANCE DEFENDANTS REVENUE AUDIT COMPLAINT ALLEGES EQUIPMENT REVENUES EARNINGS ENGAGEMENT PARTNER MANIPULATE EXCHANGE ACT REPORTS PRACTICE AFFILIATE MANAGEMENT LEASE ACCOUNTING DEVICES SENIOR CIVIL SECURITIES RESIDENT CONWAY INVESTING PROFESSIONAL PRACTICE YORK INJUNCTION CONNECTION |
Securities and Exchange Commission
Washington, D.C.
Litigation Release No. 17954 / January 29, 2003
Accounting and Auditing Enforcement Release No. 1709 / January 29, 2003
, Civil Action No. 03 CV 0671 (DLC) (S.D.N.Y.) (January 29, 2003)
SEC Charges KPMG and Four KPMG Partners with Fraud in Connection with Audits
of Xerox
SEC Seeks Injunction, Disgorgement and Penalties
On January 29, 2003, the Securities and Exchange Commission filed a
civil fraud injunctive action in the United States District Court for
the Southern District of New York against KPMG LLP and four KPMG
partners - including the head of the firm's department of professional
practice - in connection with KPMG's audits of Xerox Corporation from
1997 through 2000. The complaint charges the firm and four partners
with fraud, and seeks injunctions, disgorgement of all fees and civil
money penalties.
The complaint alleges that KPMG and its partners permitted Xerox to
manipulate its accounting practices to close a $3 billion "gap"
between actual operating results and results reported to the investing
public. Year after year, the defendants falsely represented to the
public that their audits were conducted in accordance with generally
accepted auditing standards (GAAS) and that Xerox's financial reports
fairly represented the company's financial condition and were prepared
in accordance with generally accepted accounting principles (GAAP).
The four partners named as defendants, all of whom are certified
public accountants, are
* Michael A. Conway, 59, a resident of Westport, CT, has been KPMG's
Senior Professional Practice Partner and the National Managing
Partner of KPMG's Department of Professional Practice since 1990.
He was the senior engagement partner on the Xerox account from
1983 to 1985. He again became the lead worldwide Xerox engagement
partner for the 2000 audit. Conway also is a member of the KPMG
board and is chairman of the KPMG Audit and Finance Committee.
* Joseph T. Boyle, 59, a resident of New York City, was the
"relationship partner" on the Xerox engagement in 1999 and 2000
and is a managing partner of the New York office of KPMG and of
the Northeast Area Assurance (Audit) Practice. As the relationship
partner, Boyle's chief duty was serving as liaison between KPMG
and the Xerox Board of Directors, including its Audit Committee.
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