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U.S. v. Middendorf

Fraud Conspiracy Indictment Not Dismissed; Scheme Known to Alter Inspection Results

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United States of America, Plaintiffv.David Middendorf, Thomas Whittle, David Britt, Cynthia Holder, and Jeffrey Wada, Defendants

OPINION AND ORDERDefendants David Middendorf, Thomas Whittle, David Britt, Cynthia Holder, and Jeffrey Wada are charged in a five-count indictment with offenses relating to an alleged scheme to improve KPMG’s performance on inspections conducted by the Public Company Accounting Oversight Board (“PCAOB”) by passing confidential PCAOB information to select KPMG employees. (Dkt. No. 1 (“Indictment”).) Before the Court are several motions to dismiss the Indictment. For the reasons that follow, the motions are denied.I. BackgroundThe following factual background is taken from the Indictment, the allegations of which are assumed true solely for purposes of these motions, as explained in Section II below.To register securities with the Securities and Exchange Commission (“SEC”), publicly traded companies must prepare and disclose annual financial statements that have been audited by registered public accounting firms. (Indictment2.) The PCAOB, a nonprofit corporation created by the Sarbanes-Oxley Act of 2002 (“SOX”), conducts inspections of these auditors to ensure their compliance with SOX, SEC, and PCAOB rules. (Id.4.) SOX requires the PCAOB to prepare written inspection reports which are then shared with the SEC and, in part, with the public. (Id.

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