KPMG LLP has been sued by the Missouri Department of Insurance for allegedly contributing to the 1999 collapse of General American Mutual Holding Co, in part by helping the insurer to use a risky product that eventually led to its downfall, The Wall Street Journal reported.
The lawsuit contends that KPMG allowed misrepresentations in the insurer's financial statements and didn't require disclosure of the risky nature of the investment product.
As a financial adviser, KPMG also didn't disclose the risky nature of the product to outside board members and others, the lawsuit says.
Even as the potential for “huge financial losses” was building, the suit contends, “KPMG kept scooping up as much money in fees as possible.”
The lawsuit doesn't detail the amount of fees collected by KPMG, other than describing them as “millions.”
In addition to serving as General American's auditor and business adviser, KPMG also worked in the late 1990s to prepare the insurer for an initial public offering.
A KPMG spokesman declined to comment, saying the company hadn't yet seen the lawsuit.
