Is possible jail the only bad thing on the horizon for a CPA who allegedly committed insider trading? Not quite. There’s a long list of bad things within view.
This series of posts is examining the consequences on the horizon for Mr. Scott London, former KPMG partner, as a result of his indictment for allegedly trading on insider information.
This post discusses the possible consequences of:
- loss of employment,
- loss of reputation,
- loss of professional licensing
Loss of employment
Mr. London’s employment was terminated week before last.
Public reports indicate he was the regional partner in charge of audit practice. That is a very major position which obviously would have very high levels of compensation.
Audit PIC. For the region. Of a Big 4 firm.
That is a dream position that few CPAs could ever hope to achieve. The opportunities, experiences, authority, and compensation would be astounding.
I have no idea what the comp is for a regional audit PIC of what is probably the second most lucrative region in the country. I’ll make a wild guess it’s over 1 million a year. Maybe two. By the way, I’m pulling numbers out of the air.
Even making a low assumption of $1M, that’s a huge amount of money for a CPA. He was getting paid in a couple of weeks what many people make a year.
If you scoff at that amount, keep in mind he is producing more economic value for his employer than his salary.
He was creating far more economic value in one or two weeks with his brain than most people create in a year.
That income is gone.
He could have worked for another 10 or 15 years. That means he’s out somewhere between $10 and $30 million.
Loss of reputation
His reputation is shot.
Even if the publicity dies off this afternoon and even if the tax investigation doesn’t go into the criminal realm and even if the SEC enforcement efforts were to somehow collapse and even if his attorney could successfully make an argument for no jail time and even if his current net worth is so large that he can absorb the financial hit to maintain his lifestyle and even if he can somehow afford retirement, his reputation is destroyed.
Completely, totally, utterly destroyed.
As the ‘why did he do it?‘ conversation gets going, there will be dozens of business writers pondering in public the psychological makeup of the disgraced CPA. There will be tens or hundreds of thousands of readers pondering those arm-chair assessments wondering “is it narcissism, hubris, greed, or arrogance. Hmm, I think it was…”. His friends, former colleagues, and buddies from the golf course will all be wondering.
How would you like to have around one-tenth of the professionals in your field working through an amateur assessment of your mental health?
Loss of professional license
If any of what’s been alleged is proven true, is there any doubt the California Board of Accountancy will start enforcement action down the road?
I’m quite confident they will get involved. Think it through with me – his attorney said publicly he will plead guilty, which (if correct) means a felony conviction (which won’t be going up for appeal if there’s a guilty plea) for insider trading on client information obtained during the course of providing audit services. Yeah, they’ll get involved.
Just as a guess, I think the most likely outcome of that journey will be the loss of his license.
The board obviously takes their time in enforcement actions, because they must of necessity let the criminal and civil cases run. That is a very good thing, by the way.
On the other hand, with the speed of the indictment and his attorney saying he plans to plead guilty in just over four weeks from now, the civil and criminal cases could be cleared up remarkably quick. The CBA might be able to move fast on this.
Fast or slow, I think we can all see the outcome.
So he’s lost a great job, has destroyed his reputation, and will likely lose his CPA license. And the list of consequences isn’t complete.
Next post – possible litigation from employer