UPDATE 1-KPMG fails to fairly promote women, lawsuit says

* Former KPMG senior manager sues accounting giant

* KPMG treats women with children unfairly -lawsuit

* KPMG is latest large company targeted by law firm (Adds KPMG statement)

By Terry Baynes

NEW YORK, June 2 (Reuters) - A former female senior manager at KPMG [KPMG.UL] filed a proposed class-action lawsuit accusing the accounting firm of discriminating against its female employees in pay, promotions and pregnancy leave.

The lawsuit, filed in a New York federal court on Thursday, seeks $350 million in lost pay and benefits as well as other compensatory and punitive damages on behalf of thousands of current and former female managers at the company.

The suit accuses the "Big Four" accounting firm of fostering a hostile work environment where women are underpaid and seldom promoted to leadership positions.

While women constitute nearly half of all employees at the company, they make up only 18 percent of all KPMG partners, according to the complaint.

KPMG responded in an emailed statement that the lawsuit was entirely without merit.

"KPMG is recognized as a leader for its strong commitment to supporting women in the workplace," the company said. "Among the Big Four accounting firms, KPMG is tied with the highest percentage of women partners."

The case is the latest in a series of gender discrimination suits filed by law firm Sanford Wittels & Heisler, which settled a similar case against Novartis AG (NOVN.VX) last July for $175 million.

The firm is also pursuing legal claims against French advertising company Publicis Group SA (PUBP.PA), Japanese electronics maker Toshiba Corp (6502.T), Bayer HealthCare Pharmaceuticals (BAYGn.DE) and health insurer Cigna Corp (CI.N).

Janette Wipper, a lawyer for lead KPMG plaintiff Donna Kassman, said that a common theme running through all of the law firm's gender-bias suits is the disparate treatment of female employees with children.

"When a woman has a child, she's assumed to be less committed to her job and less effective as an employee, which results in her promotion opportunities being denied," Wipper said.

After a "stellar" early career at KPMG, Kassman was in line for promotion to managing director when a "troika of men ... conspired to derail her career advancement," the suit alleged.

Male employees expressed gender hostility with complaints that Kassman was "too direct" and "unapproachable," according to the suit.

The company cut Kassman's salary by $20,000 without any business justification when she took maternity leave, the suit said.

The suit alleged that working mothers at KPMG who opt for a flexible schedule are forced to accept reduced pay while still shouldering full-time responsibilities.

The case in U.S. District Court, Southern District of New York is Kassman v. KPMG LLP, No. 11-cv-3743. (Editing by Steve Orlofsky, Gary Hill)