Accountants should provide reasonable assurance that the books and records of their clients accurately reflect the reality and that the internal accounting controls of their clients meet certain standards. There have been a number of cases in recent years where non-compliant behavior of issuers was egregious but accountants weren’t charged.
That changed just before the end of the year in a remarkable case in The Netherlands. On December 30, KPMG reached a €7 million settlement with the Dutch authorities. The total settlement consists of a fine of €3.5 million and a forfeiture of €3.5 million.
KPMG allegedly helped their client, the Dutch construction company Ballast Nedam, disguise suspicious payments. Ballast Nedam itself settled with the Dutch authorities in 2012 for €17.5 million, including a €5 million fine and waiver of efforts to recover €12.5 million from tax authorities.
Ballast Nedam made a number of suspicious payments between 1996 and 2003 to foreign agents in order to obtain business in Saudi Arabia. According to the Dutch public prosecutor, KPMG knowingly failed to verify the payments to foreign agents between 2000 and 2003 and could not determine the ultimate beneficiary of the payments.
The Netherlands hasn’t had an impressive anti-bribery enforcement record. In a report issued a couple of months ago, Transparency International put the country in the ‘limited or no enforcement’ category. Recent developments seem to indicate that the Dutch authorities are determined to change this.
This investigation started once the Dutch tax authorities approached Ballast Nedam in 2009, at least 6 years after the last suspicious payments were made. Ballast Nedam started an internal investigation and provided the results to the Dutch authorities in January 2011. Almost 2 years later, Ballast Nedam settled with the Dutch authorities and it took another year for the authorities to settle with KPMG.
KPMG said they “are shocked by the facts that have emerged from this case and find these totally unacceptable.” They said 2 of the 3 accountants involved have retired and the employment of the third accountant has been ended. Disciplinary measures have been taken and KPMG has agreed to implement additional compliance measures. The firm is also still investigating services delivered to other clients by the three (former) accountants and to clients in similar industries.
The public prosecutor is also still investigating the three former accountants, as well as some of the former managers of Ballast Nedam.
Geert Vermeulen is a compliance professional. He is a frequent speaker at international compliance conferences and teaches at the Dutch Compliance Institute. He is also a Board member of the Dutch Compliance Officers Association. Recently he wrote a chapter on third party due diligence in the first Dutch book on anti-corruption (Ondernemen zonder corruptie). This article reflects the personal views of the author.
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