NEW YORK (AP) -- Scott London, the auditor accused of leaking private information about two client companies, says he was trying to help a friend struggling with money problems, and feels terrible about the damage he's done, according to a statement released through his lawyer and in interviews.
London, 50, worked at KPMG for nearly 30 years before he was fired from the Los Angeles office last week. KMPG also resigned as auditor of Herbalife and Skechers, the two companies that he is accused of leaking information about.
Companies hire accounting firms like KPMG to certify that their own financial reports are accurate, which means KPMG employees have access to private information about client companies. London said he started leaking information about Herbalife and Skechers "a few years back," trying to help "someone whose business was struggling."
"On a few occasions over the past few years, this individual would ask if he should buy or sell a stock and I gave him my thoughts indicating whether the stock was a good buy or not," London said in the statement, which did not name the other person. "Never once did I pass any documents to him, but rather we spoke on the phone and the information I provided was in the form of a suggestion."
The other person used the inside information to trade stocks. In his statement, London said he wasn't sure how much the other person benefited from the information. The L.A. Times, which interviewed London, said the friend made as much as $100,000.
Harland Braun, a well-known Los Angeles defense lawyer, said London was struggling to come up with a reason for his actions. Braun said London decided to release a statement because he wanted to "minimize the damage" to people he had harmed: his employer, colleagues, Herbalife, Skechers and his family.
"He feels terrible, terrible," Braun said. "He can't even explain why he did it himself."
London received payments for leaking the information, but it wasn't clear how much. Braun said that London collected "about $25,000" over several years, but he added that London had never kept close track of the payments.
"It wasn't for the money," Braun said. "It doesn't make any sense."
London said none of his KPMG colleagues knew what he was doing, and KPMG "bears no responsibility in this matter. These actions were by my choice and mine only."
"I have embarrassed myself, my family, my friends, KPMG and those that worked with me while I was at KPMG," he said. "I want to express my deepest apologies for any harm that results to KPMG and the terrific employees and partners that I worked with."
KPMG withdrew the approval it had given to the recent financial reports of Skechers and Herbalife. It said it didn't think there was anything wrong with either companies' reports, but felt it had to do so because its own independence had been compromised.
London said his actions did not affect his audits of shoe seller Skechers and nutrition company Herbalife.
Both Herbalife and Skechers will now have to scramble to find new auditors and get their financial statements from previous years examined again.
The development comes at an especially inopportune time for Los Angeles-based Herbalife, which sells energy drinks, supplements and stress management pills through independent sales people. Activist investor Bill Ackman has publicly called the company a pyramid scheme and accused it of distorting the financial information it gives to investors. Herbalife has vehemently disagreed, and accused Ackman of trying to push the stock price down for his own gain.
London said that no information about Herbalife was leaked in 2012. "Accordingly," he added, "none of what I did had anything to do with Herbalife's continuing battles with investors over the company's business practices."
- Investment & Company Information