Scott London, KPMG Case

Scott London, a former KPMG audit partner, pleaded guilty to insider trading on nonpublic information about the firm's clients in April 2013. London tipped Bryan Shaw with confidential details about five KPMG audit clients including Sketchers and Herbalife. Shaw made more than $1.2 million from the insider tips he had received in trading profits.

London and Shaw had met at a country club several years earlier and became close friends and golf partners. London began providing Shaw with nonpublic information in October 2010 and the misconduct continued for the next 18 months. Shaw and London communicated almost exclusively using their cell phones, although on at least one occasion London disclosed nonpublic information in the presence of others during a golf outing.

London said that he provided insider information about his clients to help his friend overcome financial struggles after Shaws family jewelry business began to falter due to 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 his jewelry store. Shaw also gave London an expensive Rolex watch, as well as other jewelry, meals, and tickets to entertainment events.

London was sentenced to 14 months in federal prison and forced to pay a $100,000 fine. He also was fired as an auditor for KPMG and the company was forced to redo several of London's prior audits. The audit opinions signed by London on Skechers and Herbalife had to be withdrawn by the firm.

7 Steps Model

1) Determine the facts: Who, What, When, Where, How?

2) Define the Ethical Issues and Stakeholders

3) Identify Major Principles, Rules, and Values

4) Specify the Alternatives

5) Compare Values and Alternatives

6) Assess the Consequences

7) Make your Decision