KPMG US audit scandal: Department of Justice seeks to set aside ...

KPMG later paid $US50 million ($76 million) in a settlement with the Securities and Exchange Commission, which oversees the PCAOB, including charges related to the scandal. As part of the settlement it admitted using the advance notice to alter completed audits before inspectors arrived.

The DoJ secured criminal convictions from six people in all, three of whom admitted additional charges of conspiracy to defraud the SEC by interfering with the inspection process, as well as the wire fraud charges that have now been called into question.

The applicability of the wire fraud statutes turned on whether defendants were trying to steal “property” from the PCAOB or just affect the outcome of its inspections.

Recent judgments in unrelated cases, including a 2020 Supreme Court ruling, Kelly vs US, had clarified that wire fraud could not be brought against Mr Middendorf and Mr Wada, the DoJ said in a submission earlier this week to an appeals court considering appeals from Mr Middendorf and Mr Wada. The department asked for their case to be sent back to a lower court, where it said it would dismiss the charges.

Attorneys for Mr Middendorf and Mr Wada declined to comment.

Mr Britt pleaded guilty in 2019 to a single count of conspiracy to commit wire fraud, admitting to obtaining confidential information on upcoming inspections and using it to improve results. Although he had been in the US for three decades, he had never become a US citizen and was deported as a result of the conviction.

Rob Stern, a lawyer for Mr Britt, said he would try to have the guilty plea withdrawn.

“We fully expect now to go back, as I told the judge we would in these circumstances, to have the record expunged so that he can be reunited with the three college-age US children and wife who are still in the country,” Mr Stern said.