KPMG Acquitted in Norway Collection Agency Bankruptcy Case

Back in 2003, a massive corporate bankruptcy set off a maelstrom of law suits and finger-pointing, criminal trials and civil cases, and a general uneasiness about the way businesses conducted their affairs.  An accounting firm was implicated in the debacle, accused of book-cooking their way into the graces of the business owners.  Why is this familiar scenario interesting to insideARM readers?  Because the company going bankrupt was a collection agency, and the bankruptcy was one of the largest in Norway’s history.

Finance Credit was a large, successful collection agency in Norway that did their fair share of contingency work but primarily relied on debt purchasing for accounts to pursue.  In 2003, the company went belly-up, boasting an impressive $242 million in debts to eight different banks around the country (one local publication at the time called the bankruptcy “American style” – so thanks for the props, Norwegian media).

When the dust settled and the proper executives and owners of the company, Torgeir Stensrud and Trond Kristoffersen, were sued, tried and sentenced – nine years and seven years, respectively, and $161 million in compensation – the courts turned their eyes to the Norwegian unit of accounting giant KPMG.  KPMG, after all, was the accounting firm on record for Finance Credit.

In a civil case in July 2005, the eight banks successfully won a judgment against KPMG–Norway for $106 million.  The accounting firm appealed and in September of that year agreed to settle with the banks for $56 million.  But there was still the matter of criminal trials.<!–PAGEBREAK–>

Since the owners of Finance Credit were found guilty of fraud and falsifying documents, the accounting firm also caught the ire of law enforcement in Norway because of their familiarity with the books of the firm.  The individual KPMG auditor assigned to Finance Credit, John Haukland, and the entire Norwegian unit of KPMG were tried on counts of negligent accounting.

The courts finally ruled earlier today that Haukland was indeed guilty of negligent accounting and sentenced him to 30 days in jail.  KPMG, however, was acquitted of the charge.

The court said in its ruling, "Haukland is convicted of contributing through gross negligence to significant violations of the accounting laws.  Some of the negligent acts or omissions were intentionally committed."

Prosecutors claimed that the fraud extended back to 2000.  Haukland had already given up his accounting license and admitted to many of the charges, factors which led to his relatively light sentence.

The court also said that Haukland and his team were the only ones responsible on the KPMG side.  "All things considered, the court finds that it was not the organization KPMG that failed in this case, but auditor Haukland and his team," the ruling said.

Haukland does have two weeks to decide if he will appeal the verdict.