The Australian Securities and Investments Commission has sued KPMG for $200 million for alleged negligence in auditing collapsed Australian property empire Westpoint Group. The Age reports that the collapse of Westpoint in 2006 cost investors more than $300 million.
ASIC brought the case under section 50 of the ASIC Act, which allows it to launch damages suits in the public interest. “ASIC sees a clear public interest in using its powers in these circumstances to pursue compensation for the benefit of Westpoint investors,” said ASIC chairman Tony D’Aloisio.
ASIC claims that KPMG “negligently carried out its audits … by failing to identify issues related to the continued solvency of the companies and failing to qualify audits of the companies,” the ASIC chairman stated.
KPMG is represented in the matter by the law firm Allens Arthur Robinson, and stated that it would defend itself vigorously. It said in a statement that “While we understand that substantial monies have been lost by investors in Westpoint companies, and that various groups and individuals are naturally keen to recoup their losses, KPMG does not believe that the conduct of its audits of Westpoint entities caused or contributed to the collapse of the Westpoint group or to losses suffered by investors.”
The Age reports that ASIC now has 16 Westpoint-related court actions, claiming a total of almost $550 million. The largest of these is said to be the $263 million being sought from five people named as directors, including Westpoint founder Norm Carey. Interestingly, the article adds that
Mr Carey was reported last week to have launched a counter-claim against ASIC, accusing the agency of causing the group’s collapse, and claiming its investigations into the company ahead of its demise breached the rules of natural justice.