Starbucks sting is latest twist in KPMG insider case

Now it turns out that the FBI photographed L.A. accountant Scott London as a friend set him up by handing him an envelope containing $5,000, the LAT reports. The sting was in connection with London, a partner at the L.A. offices of KPMG, leaking inside information to the friend about Herbalife and Skechers. A few days after the alleged payoff, FBI agents showed up at London's home in Agoura Hills, the Times reported. When news of his firing first broke on Tuesday, London took the unusual step of talking to reporters, saying that he had casually discussed information about the two companies during a golf outing with his buddy (so far unnamed), only to have his friend later admit to trading on the information. "That's when my heart sank," he told the WSJ. So if it was all so innocent, why was he accepting money from the guy? He told the Times that the total came to $25,000 (including cash and a watch). But he told the Journal that the guy "on a couple of occasions" gave him $1,000 to $2,000. Obviously, there's a lot we don't know. One thing that is apparent about London: He likes to talk, But why? I've always found corporate accountants to be among the worst news sources - always wary, they'll often not reveal their client list (even off the record!), much less gab about any inside stuff. Maybe that's why I find this story so weird. As for what happens to London, Peter Henning, a professor at Wayne State University Law School, offers some possibilities (via DealBook):

The penalties that will be imposed on Mr. London will be far greater than any gifts he received from his friend. There is a good chance that criminal charges will be filed because of Mr. London's prominent position as KPMG's lead audit partner for Herbalife and Skechers. Prosecutors will want to send a message that any improper disclosure of client information will be punished. The potential sentence from a criminal prosecution will depend in large part on the amount of any gains or losses avoided by the friend. Mr. London's cooperation will certainly be helpful, and may allow him to avoid prison if the trading resulted in only small gains. But if the benefits were worth more than $200,000, then federal sentencing guidelines would recommend a prison term of about a year, and higher as the dollar figure grows. The S.E.C. can be expected to file civil charges, and the usual price for a settlement is a penalty equal to the benefits derived from the trading activity, plus disgorgement of any profits or benefits received. Even though Mr. London does not appear to have traded for his own benefit, under the law, he is responsible for any profits of his tippee and will have to pay the price. In addition, the S.E.C. will probably pursue an administrative action against Mr. London to bar him from acting as an auditor for any publicly traded company in the future. That would effectively prevent him from working as an accountant because no firm would dare hire him.