KPMG to Settle Audit-Related LawsuitsMar 11, 2003 | AP
Accounting firm KPMG LLP has agreed to pay $200 million to settle shareholder lawsuits related to its audits, including $125 million to end a lawsuit filed on behalf of thousands of Rite Aid Corp. shareholders.
The shareholders' lawsuit, which Rite Aid settled for $200 million in 2000, revolves around allegations that former executives of the nation's third-largest drugstore chain conspired to defraud investors by making false statements that drove up the company's stock price in the late 1990s.
Also Monday, KPMG announced that it has agreed to settle litigation involving Oxford Health Plans Inc. of Trumbull, Conn., for $75 million.
Last week, Oxford announced a $225 million settlement of investor suits related to a 1997 drop in its stock following revelations of improper revenue accounting. In that case, plaintiffs also sued KPMG, Oxford's auditor.
In both cases, the accounting firm denied wrongdoing and said the decision to settle were "based on practical business reasons" and a desire to avoid protracted litigation.
The settlements are subject to approval by a federal judge in Philadelphia.
"The settlements allow us to focus the firm on its primary missions of ensuring quality audits for our clients and helping to restore investor confidence in corporate America and the capital markets," KPMG said in a statement.
In the Rite Aid case, KPMG said the federal indictments of three former and one present executive last summer "affirm our position that Rite Aid represents a clear example of an auditing firm being victimized by company management."
KPMG said it alerted Rite Aid's audit committee to weaknesses in the company's internal auditing controls in June 1999 and that it resigned in November 1999 because it could no longer trust the information provided by top Rite Aid managers.
Federal prosecutors, whose investigation did not implicate KPMG, say the accounting scheme that unraveled in 1999 forced Rite Aid, based in Camp Hill, Pa., to increase its losses by $1.6 billion in July 2000.
Four executives are awaiting trial on federal criminal charges based on similar allegations. All four have pleaded innocent.
Plaintiffs' lawyers in New York and Philadelphia did not return telephone messages Monday.