The final two sentences have been handed down in the KPMG fiasco for stealing PCAOB inspection lists.
Spoiler alert: no jail time.
Thoughts in last half of this post on other consequences they have earned.
Former KPMG partner Thomas Whittle earned two years supervised release. Before his indictment he was the national partner-in-charge for inspections at the firm. He is now a convicted felon.
He pleaded guilty to two felony charges – conspiracy and wire fraud.
Reason for the light sentence is he testified against David Middendorf and Jeffrey Wada at their trials. Both of them were convicted.
Coverage of the case is very light. Two subscription-only articles have been published. The only readily accessible article is from Going Concern on 12/2/20: Last Indicted Ex-KPMG Partner to Be Sentenced In PCAOB Scandal Won’t Be Going to Prison. The article also provides a recap of the other five perpetrators in the fiasco.
On 11/20/20, former KPMG partner Brian Sweet was sentenced to time served, three years of probation, and restitution in an amount to be determined later. Before his indictment he was one of the partners in the national Department of Professional Practice.
For context that means he was a technician who spent all his time dealing with complex technical issues. For a technician that would be the dream job of a career. He threw it away.
He also pleaded guilty to two felony counts – conspiracy and wire fraud.
As with Mr. Whittle, Mr. Sweet drew a no-jail-time sentence because he also testified against Messrs. Middendorf and Wada.
As with the light coverage for Mr. Whittle, the only coverage of the sentencing which is not behind a pay wall is again from Going Concern on 11/30/20: No Jail Time For Another One of the “KPMG 5” Indicted In PCAOB Scandal.
Don’t be disappointed about the no jail time thing
If your sense of justice is offended that two of the players escaped a jail sentence in a scandal that disgraced every person at KPMG, discredited the PCAOB inspection process, and makes all CPAs and PCAOB staff look like cheating jerks, don’t feel too bad.
Keep in mind the price of admission to testify against the other perpetrators was pleading guilty to two felonies. That means they are both convicted felons with two, count ‘em two, felony convictions.
That has a lot of ripple effects. For starters it is a slam-dunk guarantee they will lose their CPA licenses.
Their reputation is so shot they will not work in the financial field again.
For the rest of their lives, their children’s lives, their grandchildren’s lives, and their yet-to-be-born great grandchildren’s lives their names and felonious activity will be readily available on the good ol’ Internet thingy.
Other consequences will be loss of civil rights, such as voting and possessing a weapon.
More subtle consequences include things we learned from the tale of Scott London, also previously from KPMG.
Scott London was asked to resign from all of his volunteer community activity involvement. He was asked to close his brokerage accounts and find another broker to handle his investments. Think that through – other brokerage firms were probably hesitant to open an account for him. Where do you park your stocks?
Back to Messrs. Sweet and Whittle.
They both lost a dream job in top of their career field. As a completely wild guess the compensation was probably somewhere between $1 million and $1.5 mil. Likely more.
At age 43, Brian Sweet may have had another 20 years or more to earn far above 1 million a year. Gone. $20 mil plus. Gone.
At age 57, Thomas Whittle likely had another eight or 10 years to earn a whole lot more than 1 million annually. Gone. North of $10 mil. Poof.
Oh, and the legal fees. Making totally completely wild guesses they probably spent a hundred thousand dollars give or take in legal costs. I’ll make a further wild guess that was only enough to get them to the guilty plea. A further guess is they had major legal fees as they prepared themselves to testify and they further prepared for their own sentencing.
Add up that string of completely wild guesses and I would not be shocked if they spent something in the range of 200 grand on legal fees. That comes out of their pocket, I will further guess.
So summary of some side consequences:
They blew a million-dollar a year job. For 10 or 20 years. With $100K or $200K legal fees. With loss of all civil rights. With two felony convictions. All of which is visible to the entire world until the Internet is no more.
Don’t be too sad they did not draw a jail term. They have paid a steep price. You can ponder whether it was steep enough, but they have paid. For an upper-middle-class person, oh how they have paid.