KPMG Lawsuit Record: Tax Shelter, Carillion, and Bank Failures

KPMG, one of the “Big Four” accounting firms, has faced decades of lawsuits and regulatory penalties tied to tax shelter fraud, audit failures, exam cheating, and employment claims. Tracked penalties against KPMG entities exceed $607 million since 2000 across 45 recorded enforcement actions,¹ and active KPMG lawsuits and fines remain on the docket in the United States and Canada as of mid-2026. What follows is a walk through the major cases, what they cost, and where the open matters stand.

The $456 Million Tax Shelter Case

The largest single penalty in KPMG’s history came from what the U.S. Department of Justice called the “largest-ever tax shelter fraud case.” In August 2005, KPMG signed a deferred prosecution agreement and agreed to pay $456 million, made up of $100 million in civil fines, $128 million in criminal fines and fee disgorgement, and $228 million in criminal restitution. The firm admitted it had designed and marketed fraudulent shelters known as FLIP, OPIS, BLIPS, and SOS, which generated at least $11 billion in phony tax losses between 1996 and 2003 and cost the U.S. Treasury an estimated $2.5 billion in evaded taxes.²

Nine former KPMG partners and employees were indicted, including former Deputy Chairman of Tax Jeffrey Stein and former Vice Chairman of Tax John Lanning.² The individual prosecutions then collapsed. In United States v. Stein, U.S. District Judge Lewis A. Kaplan found that the government had pressured KPMG to cut off legal fees to the defendants, violating their Fifth and Sixth Amendment rights. The Second Circuit upheld that ruling, and charges against thirteen former KPMG partners and employees were dismissed because the government had “unjustifiably interfered” with their ability to mount a defense.³

Exam Cheating and PCAOB Inspection Tampering

In June 2019, the SEC charged KPMG with secretly obtaining confidential information about upcoming PCAOB inspections and altering audit work papers to avoid negative findings, and with widespread cheating on the firm’s mandatory internal training exams. Audit professionals had shared exam answers, and some had manipulated the firm’s internal server to lower passing thresholds, in certain cases allowing staff to pass while answering fewer than 25 percent of questions correctly. KPMG admitted the facts, paid a $50 million penalty, and was required to retain an independent consultant to review its ethics and integrity controls.⁴

The cheating extended abroad. The PCAOB fined KPMG Australia US$450,000 in 2021 after finding that more than 1,100 staff members had shared answers on mandatory training tests from at least 2016 through early 2020.⁵ In April 2024, the PCAOB imposed a record $25 million fine on KPMG Netherlands after finding that hundreds of professionals, including partners and senior leadership, had shared answers on training exams from 2017 to 2022. The firm had also provided false information to the PCAOB during its investigation, claiming no knowledge of cheating before a 2022 whistleblower report despite earlier leadership involvement. Former Head of Assurance Marc Hogeboom was permanently barred from the profession.⁶

The Carillion Collapse

The January 2018 liquidation of Carillion, a UK construction and services company that went down with £7 billion in liabilities and £29 million in cash, produced one of the most damaging chapters in KPMG’s recent record. KPMG had audited Carillion for 19 years, collecting £29 million in fees, and had issued an unqualified opinion months before the company disclosed more than £1 billion in writedowns in 2017.⁷

In 2022, Britain’s Official Receiver, acting for Carillion’s creditors, launched a £1.3 billion High Court claim alleging KPMG missed “serious red flags” and that Carillion had been insolvent more than two years before its collapse.⁸ KPMG settled in February 2023 on confidential terms.⁹

The UK’s Financial Reporting Council ran a separate investigation. In October 2023, the FRC found an “unusually large number of breaches” of auditing requirements across the 2013–2016 audits, including a failure to challenge management estimates, a failure to gather sufficient evidence, and working paper records the regulator called “unreliable and, in some cases, misleading.” KPMG was fined £18.55 million for the 2014–2016 audits, and former audit partner Peter Meehan was fined £350,000 and excluded from professional membership for 10 years. A separate £2.45 million penalty covered failings in the 2013 audit.¹⁰ Earlier, in May 2022, an industry tribunal had fined KPMG a then-record £14.4 million after concluding that auditors had “deliberately misled” the FRC during inspections of the Carillion work.⁷

Other UK Regulatory Fines

In August 2021, the FRC fined KPMG £13 million, then the highest penalty ever imposed on an accounting firm in a non-audit case, over the 2011 sale of bed manufacturer Silentnight to private equity firm HIG Capital.¹¹ The FRC’s Disciplinary Tribunal found that former partner David Costley-Wood had simultaneously advised both Silentnight and HIG, whose interests were “diametrically opposed,” and had helped HIG pursue a strategy to drive Silentnight into insolvency so HIG could acquire the business while dumping the pension scheme covering roughly 1,200 workers onto the Pension Protection Fund.¹² The tribunal found Costley-Wood acted dishonestly with pension regulators and that KPMG itself had submitted an “untruthful” defense on its conflict of interest.¹³ Costley-Wood was fined £500,000 and barred from holding an insolvency license for 13 years.

In May 2022, the FRC fined KPMG £3.375 million over the 2010 Rolls-Royce audit, finding “serious failures to exercise professional scepticism” on payments to Indian intermediaries linked to bribery allegations that later formed part of a deferred prosecution agreement between Rolls-Royce and the Serious Fraud Office. Audit partner Anthony Sykes was found to have instructed a manager to remove a reference to suspicious payments from meeting minutes.¹⁴¹⁵

In March 2024, KPMG was fined £1.4625 million (after discounts) for failings in its 2018 audit of advertising agency M&C Saatchi, including a failure to properly test journal entries and insufficient scrutiny of £1.2 million in work-in-progress credits that were later reversed.¹⁶ In June 2025, the firm received a £690,625 fine (after discounts) for independence failures in the audit of agricultural company Carr’s Group, where a component auditor had exceeded the permitted tenure limit and provided prohibited tax services to a Carr’s associate.¹⁷

KPMG has received 12 FRC penalties since 2020, totaling over £60 million, or nearly half of all penalties the regulator has imposed on the Big Four in that period.¹⁸

U.S. Bank Failures and the Senate Report

KPMG audited Silicon Valley Bank, Signature Bank, and First Republic Bank, all three of which failed in early 2023. In September 2025, the U.S. Senate Permanent Subcommittee on Investigations released a report following a 28-month inquiry that reviewed over 400,000 pages of documents. The report alleged that KPMG had “years-long awareness” of recordkeeping and risk management problems at the banks but continued to issue unqualified audit opinions shortly before their failures, and it characterized the auditing industry as “significantly underregulated.” The panel recommended mandatory auditor rotation, increased PCAOB oversight, and a whistleblower office within the PCAOB.¹⁹

Investors have sued as well. A securities class action filed in San Francisco federal court against Silicon Valley Bank and KPMG alleges that offering documents contained materially false statements about the bank’s risk management. As of mid-2025, a federal judge had denied all motions to dismiss, and the case was in fact discovery and class certification briefing.²⁰ A separate investor lawsuit was filed in April 2023 against First Republic Bank and KPMG by a Florida-based public pension fund, alleging the defendants “repeatedly overstated the safety” of the bank’s business model.²¹

Canadian Enforcement Over Bridging Finance

On March 31, 2026, the Ontario Securities Commission filed an enforcement proceeding against KPMG before the Capital Markets Tribunal, alleging the firm failed to conduct adequate audit procedures for the 2019 and 2020 audits of four funds managed by Bridging Finance Inc. The OSC alleges KPMG issued auditor’s reports containing false representations that the audits had been conducted in accordance with Canadian auditing standards, when in fact the firm failed to sufficiently examine the valuation of loans, described as the “most critical aspect” of the funds’ financial statements. Bridging Finance was placed into receivership one month after the last KPMG audit report was issued.²² The OSC is seeking penalties of up to $40 million.²³ KPMG has said it disagrees with the allegations and intends to “vigorously defend its work.” A first case management hearing was scheduled for May 5, 2026.²⁴

Employment and Benefits Cases

In June 2011, current and former female employees filed Kassman v. KPMG LLP in the U.S. District Court for the Southern District of New York, alleging systemic gender-based pay and promotion discrimination, pregnancy discrimination, and a failure to investigate harassment complaints. Lead plaintiff Donna Kassman alleged she received a $20,000 base salary cut on returning from maternity leave in 2003 and was denied promotion to Managing Director in 2008 based on stereotypical criticisms of her communication style.²⁵ The court granted conditional certification for an Equal Pay Act collective of roughly 1,100 women who opted in from a notice pool of about 9,000, but in November 2018 denied broader class certification. The parties settled for $10 million, with the court granting approval on April 12, 2021, and closing the case on June 22, 2022.²⁶

In Chong v. KPMG LLP, participants in KPMG’s 401(k) plan alleged in the U.S. District Court for the District of New Jersey that the firm violated ERISA by burdening its approximately $6 billion retirement fund with excessive fees and costly investments.²⁷ The case covered a class of roughly 44,000 workers. KPMG agreed to pay $650,000, with final approval on July 23, 2024.²⁸

Additional Audit Failure Cases

In August 2017, the SEC censured KPMG and ordered it to pay more than $6.2 million for failing to properly audit the 2011 financial statements of Miller Energy Resources, an oil and gas company that had grossly overstated asset values and double-counted fixed assets. Engagement partner John Riordan was fined $25,000 and suspended from SEC practice, with the possibility of applying for reinstatement after two years.²⁹

In March 2025, the PCAOB issued disciplinary orders against nine KPMG network firms across four continents for failing to properly disclose the participation of other accounting firms in their audits and for related quality control breakdowns. The nine firms, spanning Australia, Brazil, Canada, Israel, Italy, Korea, Mexico, Switzerland, and the UK, were censured and collectively fined $3.375 million.³⁰

Targus Group International sued KPMG for $50 million, alleging the firm had failed to detect a three-year, $40 million embezzlement scheme by CFO William Anthony Lloyd during KPMG’s tenure as global auditor from 1993 to 2001. Lloyd pleaded guilty to 15 counts of wire fraud and was sentenced to 37 months in federal prison.³¹ An Orange County Superior Court judge sanctioned KPMG’s defense counsel for discovery abuses, including violating court orders, lying about the existence of documents, and refusing to produce them. The case settled in March 2006 for $22.5 million.³²

What Is Still Active

Several matters remain open. The OSC’s Bridging Finance enforcement action is in its early stages in Canada, with up to $40 million in penalties sought.²³ The Silicon Valley Bank securities class action is proceeding through discovery in federal court in California.²⁰ The First Republic investor suit is likewise pending.²¹ The Senate report, while not itself a legal action, has amplified calls for legislative reform of audit oversight that could reshape how KPMG and its peers are regulated.¹⁹ One recent matter closed without action: an FRC investigation into KPMG’s audit of gambling company Entain’s 2022 accounts was opened in late 2024 and closed in April 2026 with no enforcement action taken.³³

1
Violation Tracker. KPMG Violation Tracker
2
U.S. Department of Justice. KPMG to Pay $456 Million for Criminal Violations
3
Harvard Law School Forum on Corporate Governance. U.S. v. Stein
4
U.S. Securities and Exchange Commission. SEC Charges KPMG With Alter Audit Work Papers and Exam Cheating
5
The Guardian. US Watchdog Fines KPMG Australia Over Widespread Cheating on Training Tests
6
PCAOB. PCAOB Imposes Record $25 Million Fine on KPMG Netherlands
7
Financial Times. KPMG Settles Carillion Audit Negligence Claim
8
The Guardian. KPMG Settles Negligent Auditing Claim by Carillion Creditors
9
Bloomberg Tax. KPMG Settles $1.3 Billion Suit With Carillion Liquidator
10
Financial Reporting Council. Sanctions Against KPMG LLP, KPMG Audit Plc, and Two Former Partners
11
The Guardian. KPMG Fined £13m Over Sale of Silentnight to Private Equity Firm
12
Financial Reporting Council. Sanctions Against KPMG and Former Partner in Relation to Silentnight
13
City A.M. KPMG Halts Referrals to Former Restructuring Unit
14
Financial Reporting Council. Sanctions Against KPMG and Anthony Sykes
15
The Guardian. KPMG Fined Over Rolls-Royce Audit
16
Financial Reporting Council. Sanctions Against KPMG LLP and Audit Partner
17
Financial Reporting Council. Sanctions Against KPMG LLP and Nick Plumb
18
Global Investigations Review. KPMG Hit With Lion’s Share of Accounting-Related Enforcement in UK
19
U.S. Senate. New Senate Report Reveals KPMG’s Willful Ignorance in Lead-Up to Collapse of Troubled Banks
20
Kessler Topaz Meltzer & Check. In Re SVB Financial Group Securities Litigation
21
Bloomberg Law. First Republic Bank Auditor KPMG Targeted in Investor Lawsuit
22
Ontario Securities Commission. OSC Alleges Auditing Failures by KPMG in Connection With Bridging Finance Funds
23
BNN Bloomberg. OSC Alleges Audit Failures by KPMG, Seeking Up to $40M in Penalties
24
Capital Markets Tribunal. Notice of Hearing — Ontario Securities Commission v. KPMG LLP
25
Sanford Heisler Sharp McKnight. KPMG Gender Discrimination Case
26
Civil Rights Litigation Clearinghouse. Kassman v. KPMG LLP
27
Pensions & Investments. KPMG to Pay $650,000 to Settle 401(k) Plan Lawsuit
28
KPMG ERISA Settlement. Chong v. KPMG LLP Settlement
29
U.S. Securities and Exchange Commission. KPMG Paying More Than $6.2 Million for Deficient Audits of Miller Energy
30
PCAOB. PCAOB Sanctions Nine KPMG Global Network Firms
31
Orange County Register. KPMG Settles Targus Lawsuit
32
Greene Broillet & Wheeler. GBW Obtains Court Order Against KPMG for Serious Discovery Abuses
33
Financial Reporting Council. Closure of Investigation Regarding the Audit of Entain Plc by KPMG LLP