Accounting firm KPMG LLP will pay an undisclosed amount to settle a $50 million malpractice lawsuit brought by former client Targus Group International Inc., according to court officials.
The settlement was reached early on Tuesday after some six months of negotiations between KPMG and privately held Targus, a maker of computer cases based in Orange County, California, said court officials close to the case.
Terms of the settlement are confidential.
Targus sued KPMG in 2003 for failing to discover that the company’s chief financial officer had embezzled $40 million, according to court documents.
KPMG was Targus’ global auditor and business and tax accountant between 1993 and 2001, when William Anthony Lloyd was found to have “utilized the company’s credit facilities and cash flow for his personal benefit” and “covered up his activities by creating false and fraudulent entries on the company’s books and records,” according to court documents.
Lloyd pleaded guilty in 2001 to 15 counts of wire fraud and was sentenced to 37 months in federal prison.
Targus claimed it lost an additional $10 million in costs associated with the embezzlement.
However, KPMG said it had relied on false information obtained during their audits and had no knowledge that anything was wrong, court documents said.
Targus attorney Michael Avenatti declined to comment. KPMG had no immediate comment, a spokesperson said.
Last year, KPMG’s legal team was sanctioned $30,000 by Orange County Superior Court Judge Geoffrey Glass for withholding documents “in order to gain unfair advantage,” and jurors were to be told about the sanction, according to the court order.
KPMG appealed that sanction. Glass rescinded his earlier order late on Monday and KPMG dropped its appeal on Tuesday.