June 27 A U.S. Securities and Exchange Commission judge has issued suspensions for two KPMG auditors, temporarily barring them from practicing or appearing before the regulator after finding they did not properly vet the books of a Nebraska bank before it failed.
Carol Fox Foelak, an SEC administrative law judge, ruled on Friday that KPMG auditors John Aesoph and Darren Bennett overlooked "numerous red flags" when auditing TierOne Bank's 2008 financial statements.
TierOne collapsed under the weight of loan losses during the financial crisis and the SEC in 2012 charged TierOne Bank executives with understating losses.
In January 2013, the SEC sued Aesoph and Bennett, saying they did not properly review TierOne's allowance for loan and lease losses, and also did not get enough evidence to support estimates by management of fair value for the collateral tied to their risky loans.
Aesoph and Bennett have denied wrongdoing.
But on Friday, Foelak said Aesoph and Bennet "failed to sufficiently address... that (TierOne) management was inept and had an incentive to understate losses." Despite that, Foelak said KPMG issued a clean audit opinion of TierOne.
Foelak barred Aesoph from practicing or appearing before the SEC for one year, and Bennett for six months, according to the ruling.
Gary Bendinger, a partner at Sidley Austin who represents Bennett, said "we're reviewing the decision with Mr. Bennett and we're considering all options, including an appeal."
Lawyers for Aesoph did not immediately respond to a request for comment and neither did an SEC representative. (Reporting By Casey Sullivan; Additional Reporting by Nate Raymond; Editing by Ken Wills)