KPMG Settles over Gemstar Audit

The Big Four firm also shuffles managers in its tax practice.
Stephen TaubSeptember 13, 2005

KPMG LLP has agreed to pay $25 million to settle a class-action lawsuit stemming from its audit of Gemstar-TV Guide International Inc., according to press reports.

Gemstar, which publishes TV Guide magazine, restated its results for the period September 1999 through March 2002 after admitting that it had overstated revenue by nearly $250 million.

Last October, the Securities and Exchange Commission settled charges with KPMG, two former partners, and a current partner and senior manager for “improper professional conduct” as auditors for Gemstar. The $25 million includes $10 million that KPMG agreed to pay in that settlement, said Blair Nicholas, the lawyer who represents the class-action plaintiffs, according to Bloomberg..

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Gemstar, which is 41 percent owned by News Corp., settled similar shareholder lawsuits last year for $67.5 million, the wire service also reported.

In other KPMG news, the Big Four firm made managerial changes two weeks after settling a federal tax-shelter case. Shaun T. Kelly was named vice chairman for tax services, and Frederick S. “Rick” Smith was named vice chairman for tax services operations.

Kelly succeeds James Brasher, who will assume “other significant duties within KPMG’s organization,” according to a company announcement; Smith succeeds John Chopack, who will retire as planned in early 2006.

Finally, Eugene D. O’Kelly, KPMG’s chairman and chief executive officer from 2002 to 2005, died Saturday at the age of 53, according to the company. O’Kelly, who joined the firm in 1972, was hailed in a company statement “as bringing reforms aimed at restoring KPMG’s professional credibility”
following an investigation into questionable tax shelters sold in previous years. In June, after disclosing that he had advanced-stage cancer, O’Kelly resigned his executive roles but remained a senior partner.

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