KMPG Insider Trading Scandal (4/11/2013)

Summary

Scott London, a former KPMG executive, is embroiled in a major insider trading scandal, allegedly leaking confidential information about several California-based companies. London provided tips to his friend, stock trader Brian Shaw, who used this proprietary information to make illegal profits exceeding a million dollars. The FBI uncovered cash transactions and gifts between the two, with London accepting $50,000 in total. London faces severe criminal charges, including up to five years in prison, while Shaw cooperated with authorities and admitted to his role. The case also involved key companies like Herbalife and Decker’s Outdoor.

Takeaways

• 😀 Scott London, former KPMG executive, is accused of insider trading involving several big California-based companies.
• 😀 London allegedly provided inside information to his stock trader friend, leading to illegal profits.
• 😀 The FBI claims London accepted $50,000 in cash and gifts from his friend, jeweler Brian Shaw.
• 😀 One of the most significant tips was about Decker's Outdoor, the company behind UGGs, where Shaw allegedly made over a million dollars in illegal profits.
• 😀 London allegedly told Shaw that insider trading was 'like counting cards in Vegas,' suggesting he saw it as a strategic advantage.
• 😀 Shaw's jewelry business struggled during the recession, which allegedly prompted him to engage in illegal trading based on tips from London.
• 😀 The FBI has a photo showing London accepting $5,000 in cash from Shaw, which London believed was his cut of profits.
• 😀 London faces up to five years in prison and substantial fines if convicted of the charges.
• 😀 Shaw cooperated with the FBI, choosing to go forward with authorities without any deals in exchange for his testimony.
• 😀 One of the insider tips was about Herbalife, where London allegedly tipped Shaw off about expected earnings and stock movement.
• 😀 Despite their regret for their actions, both London and Shaw have admitted their involvement, though it remains to be seen if this will affect their sentencing.

Q & A

Who is Scott London and what is he accused of?

Scott London is a former senior partner at KPMG, accused of insider trading by leaking proprietary information about several California-based companies his firm audited.

What is the significance of the photo showing Scott London accepting money?

The photo shows Scott London accepting $5,000 in cash from jeweler Brian Shaw, which London allegedly believed was his cut from illegal profits made through insider trading tips.

What companies were involved in the insider trading scandal?

The insider trading scandal involved at least five companies, with a notable example being Decker’s Outdoor, which sells Ugg boots.

How much money did Scott London allegedly receive from his friend Brian Shaw?

Scott London is accused of accepting a total of $50,000 in cash and gifts from his friend Brian Shaw.

What was the role of Brian Shaw in the insider trading scheme?

Brian Shaw, a jeweler whose business was struggling, allegedly received insider tips from Scott London, making over a million dollars in illegal profits before cooperating with authorities.

What did the FBI claim about Brian Shaw's cooperation?

The FBI claimed that Brian Shaw cooperated fully with authorities and decided to work with the government without any prior deals, providing truthful information about the insider trading scheme.

How did the insider tips from Scott London affect Herbalife stock?

Scott London allegedly tipped off Brian Shaw that Herbalife would likely beat earnings, which should have caused the stock to rise. However, London also expressed concern about Bill Ackman influencing the stock price.

What were the alleged discussions between Scott London and Brian Shaw about Herbalife?

In one exchange, Brian Shaw wished that Scott London had known about hedge fund manager Bill Ackman’s plans to influence Herbalife’s stock price. London agreed, expressing regret that they missed that opportunity to profit.

What are the potential legal consequences for Scott London?

If convicted, Scott London faces up to five years in prison and hefty fines due to the insider trading charges.

What has Brian Shaw said about his involvement in the scandal?

Brian Shaw has publicly admitted his regret and referred to his actions as 'stupid,' but it remains to be seen if this will influence the authorities' leniency toward him.