FORMER KPMG PARTNER PAYS $100,000 TO SETTLE SEC LITIGATION RELATING TO XEROX AUDITS
FOR IMMEDIATE RELEASE
Washington, D.C., October 6, 2005 - The Securities and Exchange Commission announced that Joseph T. Boyle, a former partner with KPMG LLP, agreed to settle the SEC's charges against him in connection with his role as the relationship partner on the audits of Xerox Corp. from 1999 through 2000. Boyle consented to the entry of a final judgment in the SEC's civil litigation against him pending in the U.S. District Court for the Southern District of New York. The final judgment, which is subject to approval by the Honorable Denise L. Cote, orders Boyle to pay a civil penalty in the amount of $100,000, and also orders that Boyle be permanently enjoined from violating the provision of the federal securities laws that requires reporting of likely illegal acts to a company's audit committee, its board of directors and ultimately to the Commission (Section 10A of the Securities Exchange Act of 1934).
Boyle also consented to the issuance of an SEC Order based on the entry of the injunction in the federal court action that will suspend him from appearing or practicing before the SEC as an accountant for a period of one year. Boyle consented to the entry of the injunction, penalty and SEC Order without admitting or denying the SEC's findings.
"Auditors, including relationship partners, are gatekeepers who bear special responsibilities in the financial reporting process. Auditors who fail to perform those legal duties risk meaningful sanctions," said Linda Chatman Thomsen, the SEC's Director of the Division of Enforcement.
"Relationship partners who act as the liaison to public companies' boards of directors play a critical role in ensuring that important information makes its way to the issuer," said Paul R. Berger, an Associate Director of Enforcement. "When the relationship partner, or any auditor, becomes aware of information indicating that an illegal act may have occurred, it is imperative that such information be immediately conveyed to the audit committee and, if necessary, the full board."
As alleged in the SEC's federal court complaint, in the course of serving as the relationship partner for Xerox during 1999 and 2000, Boyle was told by the audit engagement partner that Xerox was engaged in improper accounting and that KPMG had a "professional obligation" to communicate these concerns to the Xerox Audit Committee. Despite these warnings, Boyle did not report these likely violations to the Xerox Audit Committee or take other steps required by Section 10A of the Exchange Act when Xerox management did not correct the violations. Boyle retired from KPMG in 2003.
The SEC's civil fraud injunctive action against four other KPMG audit partners involved in the 1997 - 2000 Xerox audits is ongoing. See Litigation Release No. 17954 / January 29, 2003/Accounting and Auditing Enforcement Release No. 1709/ January 29, 2003; Litigation Release No. 18389 / October 3, 2003.
In connection with the Xerox accounting fraud, the Commission previously announced settled enforcement proceedings against KPMG LLP, Xerox and six former senior executives of Xerox. See Litigation Release No. 19191 / April 19, 2005/Accounting and Auditing Enforcement Release No. 2235 / April 19, 2005 (KPMG LLP settlement); Litigation Release No. 17465 / April 11, 2002 / Accounting and Auditing Enforcement Release No. 1542 / April 11, 2002 (Xerox settlement); Litigation Release No. 18174 / June 5, 2003 / Accounting and Auditing Enforcement Release No. 1796 / June 5, 2003 (settlement of six former Xerox executives). The Commission obtained civil penalties and disgorgement in all of these actions in excess of $54 million.
For further information contact:
Paul R. Berger, Associate Director of Enforcement -- (202) 551-4910
James A. Kidney, Assistant Chief Litigation Counsel - (202) 551-4441