KPMG sued over Westpoint auditing lapses

13 October 2008

The Australian Securities and Investments Commission, has sued KPMG, the second-largest accounting firm in the country, for $200 million for alleged negligence in auditing at collapsed realty giant Westpoint Group.

The collapse of Perth-based Westpoint in 2006 cost investors more than $300 million.

ASIC, which had hinted at the likelihood of the civil action almost a year ago, said its claims exceeded the losses because the same losses were being claimed against different defendants.

The regulator said Westpoint continued to raise money from unsuspecting investors because KPMG gave its accounts the green light.

Westpoint, which collapsed three years ago, owe about 4,000 investors more than $330 million. While the investors may not recoup their investments, ASIC is seeking $200 million in damages towards repaying their losses.

Westpoint sold high-interest, high-risk finance products to unsophisticated and mostly elderly investors. ASIC calculated the damages by estimating trading losses of the eight insolvent Westpoint-related companies in the three years until June 2004 when KPMG was auditing their accounts.