Westpoint, KPMG Settlement Wound Up

Lucas Gilmore, “Big 4″ observer
February 04, 2011 /

The Australian Securities & Investments Commission has finally brought to terms the settlement with Westpoint directors and its independent audit firm, KPMG, in a “raw deal” over allegations of audit failure against the auditors that had allegedly caused losses on Westpoint investors.

KPMG has paid the total $67.45 million to 4000 investors while Westpoint directors are believed to be liable to only hundreds of thousands in settlement, totaling $170 million in funds recovered. According to one of Westpoint directors, Norm Carey, the “raw deal” was guaranteed to affected investors even after the ASIC has ordered KPMG to pay for the settlement.

However, only 80 percent of the injured investors who shelled out money for Westpoint’s mezzanine finance schemes are likely to receive the amount, which is also just a fraction of the $388 million total loss incurred by Westpoint when it declared bankruptcy in 2006.

Although it agreed to settle the charges, KPMG said it was not a sign of admission of the allegations hurled against the audit firm.

At issue was the alleged disregard by KPMG auditors on the financials of Westpoint. ASIC claimed that KPMG failed to identify the issues which later dragged Westpoint down, while investors were in the receiving end of the impact of insolvency. ASIC also claimed KPMG failed to ring the alarm over Corporations Law breach committed by Westpoint.

On the other hand, KPMG said it will petition the court to challenge the authority of ASIC to charge the audit firm on the investors’ behalf.

Meanwhile, Carey said Westpoint investors had been denied of their total claim to the settlement when ASIC closed its business in 2006. He said ASIC should have allowed the business to operate normally until investors have recovered what was due them completely before it shut down the company.

He claimed receivers, liquidators, and ASIC received $155 million overall upon the collapse of Westpoint, for which case he is suing ASIC.

However, ASIC denied Carey’s figures. ASIC chairman Tony D’Aloisio added the settlement was intended to avoid the impending trial in September and to add up to the amount investors would receive.

“A confidential commercial resolution is, because of the age and circumstances of the investors, the preferred resolution in a case such as this where litigation can take years,” D’Aloisio said in a statement.

 

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