Auditing

KPMG Fined $100 Million by Oslo Court

Ruling centers on the audits of a Norwegian collection agency that itself owed about $200 million to eight banks when it went out of business.
Stephen TaubJuly 15, 2005

More troubles for KPMG. The Norwegian branch of the Big Four firm was ordered to pay $100 million in damages stemming from the 2003 bankruptcy of Finance Credit, according to the Associated Press.

An Oslo court found the firm negligent in auditing the books of Finance Credit, a collection agency that itself owed about $200 million to eight banks when it went out of business, according to the report.

KPMG was ordered to compensate creditors through the defunct company’s bankruptcy administrator, the AP added, and to pay $1 million in legal costs.

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The firm stated it was “surprised and disappointed” by the ruling, especially given that the financials were falsified with criminal intent, according to the report. “There was massive economic crime by a number of people in the leadership of Finance Credit,” group partner Tom Myhre told the AP.

Indeed, noted the wire service, Finance Credit co-founder Trond Kristoffersen was sentenced to nine years in prison and ordered to pay $185 million in damages for fraud, hiding assets, and accounting violations.

The Oslo court reportedly ruled that Finance Credit exaggerated its assets, including the value of goodwill, leading creditors to believe that the company was an acceptable loan risk. By the end of 2000, added the AP, it was already insolvent, which the court determined that KPMG should have seen in its annual review of the company’s books.

“As auditor, KPMG should have uncovered that the largest assets listed by the company was the value of goodwill, and that the goodwill was significantly overvalued,” stated the ruling, according to the AP.

The accounting firm plans to appeal, the wire served also reported.