On Wednesday, the U.S. Securities and Exchange Commission announced that it has filed charges against two KPMG auditors for allegedly failing to detect problems at a Nebraska-based bank that concealed from investors millions of dollars in loan losses during the financial crisis, before filing for bankruptcy protection.
The SEC alleges that KPMG partner John J. Aesoph and senior manager Darren M. Bennett both "failed to appropriately scrutinize management's estimates of TierOne's allowance for loan and lease losses." Relying on management's assurances that its numbers were right, they failed to do the work necessary to be sure of the true "fair value of the collateral underlying the bank's troubled loans." Indeed, the SEC characterized their work as mere "rubber stamping" of TierOne's own statements, working off a "complete lack of documentation."
The SEC's complaint will now be considered by an administrative law judge, who will determine whether the agency's allegations are true and "what, if any, remedial sanctions are appropriate." A decision is expected to be rendered within the next 300 days.
Executives at TierOne Bank itself have already been charged in relation to these matters, with two having already agreed to settle the charges against them, and a third contesting the charges.
