The problems seem to be mounting for former KPMG Auditing Partner Scott London.  On April 11, 2013, the Securities and Exchange Commission issued a press release.

The SEC alleges that Scott London tipped Bryan Shaw with confidential details about five KPMG audit clients and enabled Shaw to make more than $1.2 million in illicit profits trading ahead of earnings or merger announcements. The two men had met at a country club several years earlier and became close friends and golfing partners. London has said that he provided the inside information about his clients to help Shaw overcome financial struggles after his family-run jewelry business began faltering in the economic downturn. In exchange for the illegal trading tips, Shaw paid London at least $50,000 in cash that was usually delivered in bags outside of his Encino, Calif. jewelry store. Shaw also gave London an expensive Rolex watch as well as other jewelry, meals, and tickets to entertainment events.

Further details can be found in the complete SEC Complaint.

Criminal charges for insider trading were then brought by the Federal Bureau of Investigation saying he gave a stock-trading friend inside information about his firm’s clients in exchange for cash, jewelry and expensive dinners. The prosecutors version of Mr. London’s activities conflicted significantly with London’s statement that the information he gave his buddy was sparse and that his involvement in the stock trades was minimal.

Mr. London was arraigned and is free on $150,000 bail.  Harlan Braun, defense attorney for Scott London, has said that he expects his client to plead guilty at a hearing set for May 17th.

KPMG LLP Chairman and CEO John Veihmeyer issued the following statement upon reviewing the criminal complaint filed against former partner Scott London.

What’s particularly odd about this case is the fact that Scott London freely admitted sharing inside information for profit in his first interview with the FBI, SEC and U.S. Attorney General and the fact that immediately following his arraignment his attorney made a public statement that his client intends to plead guilty.  Despite these unusual circumstances, Defense Counsel has also publicly stated that he does not expect his client to face any jail time?

So how is this possible?  If convicted of all charges, Mr. London faces a prison term of as long as five years.  The current environment is that federal prosecutors have been pushing hard for the past several years for white collar criminals to get hard time for insider trading.  Having already admitted publicly to sharing inside information with his golf buddy, what leverage does Mr. London possibly have with the Feds to avoid spending several years in jail?