Scott London, a former senior partner with accounting firm KPMG, agreed to plead guilty to securities fraud for his involvement in insider trading, according to an announcement from the U.S. Attorney's Office in Los Angeles.
London, 50, supervised more than 500 accounting professionals at KPMG and oversaw audits of Herbalife Ltd (HLF.N) and Skechers USA Inc (SKX.N), according to prosecutors. He faces a maximum term of 20 years in federal prison and a maximum fine of $5 million or twice the gross gain or gross loss resulting from his offense, according to the plea agreement.
London's plea agreement comes about a week after his one-time golfing buddy Bryan Shaw pleaded guilty to one count of conspiracy to commit securities fraud for his role in the scheme.
London and his lawyer Harland Braun were not immediately available to comment.
Shaw, a jeweler, gave London cash, an expensive watch and other gifts in exchange for tips on Herbalife, Skechers and other companies that helped him generate more than $1 million in illegal profits, according to prosecutors.
Shaw sometimes gave London bags filled with cash at meetings on street corners and in parking lots, according to prosecutors.
In his plea agreement, London admitted that he gave Shaw inside information regarding at least 14 separate earnings announcements or acquisitions by KPMG clients, including Herbalife's May 2, 2011 earnings announcement and United Rentals' (URI.N) December 16, 2011 announcement of its acquisition of RSC Holdings, according to prosecutors.
Shaw agreed to pay around $1.3 million in restitution and will continue to cooperate with the government's investigation as part of his plea.
London is scheduled to appear in federal court on Friday, though that will likely be pushed back, according to the U.S. Attorney's Office in Los Angeles.
Shaw, who pleaded guilty on May 20, has a sentencing hearing on September 16.
Manuel Goncalves, a spokesman for KPMG, did not immediately return requests for comment.
(Reporting by Bernard Vaughan in New York; Editing by Lisa Shumaker)