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Ex-KPMG partner, oversight board employee found guilty in leak case

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By Brendan Pierson

NEWYORK (Reuters) – A former KPMG partner and a former employee of an accounting industry oversight body were found guilty on Monday of taking part in a scheme to give confidential information to the Big Four audit firm to help it pass inspections.

David Middendorf, who was head of a department at KPMG, and Jeffrey Wada, who worked for the Public Company Accounting Oversight Board (PCAOB), were both convicted of wire fraud and conspiracy to commit wire fraud by a jury in federal court in Manhattan.

They were both acquitted of one of the counts against them, conspiracy to defraud the U.S. government.

A lawyer for Wada, Justin Weddle, declined to comment on the verdict. Nelson Boxer, a lawyer for Middendorf, could not immediately be reached.

The case emerged from a 2017 shakeup in which KPMG said it fired six people over leaks to the PCAOB.

The PCAOB, a private nonprofit, is responsible for carrying out regular inspections of audits performed by firms like KPMG. The results of the inspections, including any areas of concern, are passed on to the U.S. Securities and Exchange Commission.

Prosecutors claimed Wada leaked confidential information about upcoming PCAOB inspections to people at KPMG, including Middendorf, between 2015 and 2017. The charges were unveiled in January 2018.

Prosecutors also charged Cynthia Holder and Brian Sweet, two former PCAOB staffers who joined KPMG during that period, with taking part in the scheme by bringing confidential information with them to their new jobs. Wada was angling to make a similar move, according to prosecutors.

Former KPMG executive Thomas Whittle was also charged. Holder, Sweet and Whittle all pleaded guilty before trial.

A lawyer for Wada argued during the trial that prosecutors had failed to prove Wada was the source of the leaks, while a lawyer for Middendorf said his client was not involved in any wrongdoing at the company.

(Reporting by Brendan Pierson in New York; editing by Jonathan Oatis)

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