-Caveat Lector-
>From http://www.guardian.co.uk/business/story/0,3604,747170,00.html
}}}>Begin
KPMG conflicts of interest revealed
Jeevan Vasagar and Rob Evans
Monday July 1, 2002
The Guardian
The giant financial consultancy KPMG, whose polo-playing boss is paid £1.7m a
year, has had at least five potential conflicts of interest in its dealings with the
British taxpayer, a Guardian investigation has found.
KPMG is one of the so-called big four who dominate the accountancy world, and is
the latest auditor to be at the centre of controversy over scandals in the US. It
audited Xerox, which on Friday admitted overstating its revenues during the past
five years by almost $2bn.
We have found:
· KPMG was paid to advise Hertfordshire University on a contract to build student
halls which was awarded to one of its construction company clients.
· KPMG advised the highways agency on a major road project awarded to another
of its clients.
· KPMG took £128,000 from the government for an "unacceptable" investigation
into the tax haven of Belize. It was doing extensive business with the offshore
operators itself.
· KPMG was paid by the Foreign Office to investigate a series of other offshore tax
havens in the Caribbean, where KPMG had its own lucrative offshore operations.
· KPMG has been allowed to place secondees in sensitive departments in the inland
revenue, the Department of Trade and Industry and the serious fraud office, while
specialising in advising firms and individuals how to avoid British tax. In return for
£500 KPMG last month told our reporter in London how to set up an offshore trust.
While the consultancy operates in more tax-avoidance offshore centres than other
firms, KPMG has been paying British politicians and political parties with a generous
hand. Both Toby Harris, leader of the London assembly's Labour group, and Steve
Bassam, before he became a Home Office minister, have been on the KPMG
payroll.
The firm also - uniquely - loaned a KPMG man, Rees Aronson, to serve as the
Labour party's finance director in the year running up to the last general election. It
sponsored and had a KPMG partner on the "independent" commission set up by the
Labour IPPR thinktank to promote private finance initiative deals, which are
lucrative for KPMG. The firm also helps the Tories, providing several Conservative
frontbenchers with free research.
"These big accountancy firms can't simultaneously serve two masters," said Prem
Sikka, professor of accounting at Essex University yesterday. "The question must
be asked: are they taking the taxpayer for a ride?"
Prof Sikka, a strong of what he calls the "anti-social practices" of the big four,
calls
for wholesale reform in his book Dirty Business, to be published today. He says as
much as £85bn in tax may be lost to Britain because of avoidance promoted by the
big four.
Last year KPMG took in more than £7bn in fees from 152 offices spread across the
globe. While Mike Rake, who heads KPMG in Britain and its international
organisation, was paid £1.7m, the firm's 690 partners in Britain took an average of
£413,000 in profits.
KPMG's head of corporate affairs, Gavin Houlgate, last night said the firm did not
believe any conflicts of interest had taken place: "These events were all on the
record. They are open and well-known."
He said KPMG had operated in a tightly regulated environment, did not favour any
one political party, and behaved no differently from the other big accountancy firms.
Guardian Unlimited © Guardian Newspapers Limited 2002
End<{{{
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