Post by policecar on Feb 11, 2009 15:06:41 GMT
'Independent' KPMG earned millions from HBOS
Patrick Hosking, Banking and Finance Editor
The "independent" experts hired by HBOS to investigate allegations of serious failings at the bank in 2005 had been receiving millions of pounds in fees from the company for years.
KPMG, which was hired by Lord Stevenson of Coddenham, the HBOS chairman at the time, to investigate claims by the whistle-blower Paul Moore, received fees for auditing, tax advice, information technology work and compliance advice.
Last year it was paid £11.4 million in fees by HBOS and the year before £11.2 million, and it had had a close relationship with the bank since 2001, when it was appointed auditor.
HBOS is understood to be one of its biggest clients in the UK.
The closeness of the relationship and the size of the fees — millions of which were earned for non-audit work — are likely to raise questions about KPMG's independence in conducting the highly sensitive investigation.
Lord Stevenson told MPs on the Treasury Select Committee yesterday that the Financial Services Authority (FSA) was satisfied with the KPMG report and regarded the matter as closed. He described it as "independent".
Mr Moore, the head of risk at HBOS from 2002 to 2005, accused HBOS and its former chief executive, Sir James Crosby, of fostering a culture where growth and sales took precedence over financial prudence and of stamping on any challenge to that philosophy.
Sir James stepped down today as the deputy chairman of the FSA.
Mr Moore had previously worked at KPMG as a partner in the financial services practice from 1995 to 2002, adding to the potential conflict of interest.
Sources at KPMG said that it was well able to manage the potential conflict of interest.
The investigation is understood to have been conducted by its forensic team, which is separate from its audit partners.
HBOS, which is now part of Lloyds, declined to comment
Patrick Hosking, Banking and Finance Editor
The "independent" experts hired by HBOS to investigate allegations of serious failings at the bank in 2005 had been receiving millions of pounds in fees from the company for years.
KPMG, which was hired by Lord Stevenson of Coddenham, the HBOS chairman at the time, to investigate claims by the whistle-blower Paul Moore, received fees for auditing, tax advice, information technology work and compliance advice.
Last year it was paid £11.4 million in fees by HBOS and the year before £11.2 million, and it had had a close relationship with the bank since 2001, when it was appointed auditor.
HBOS is understood to be one of its biggest clients in the UK.
The closeness of the relationship and the size of the fees — millions of which were earned for non-audit work — are likely to raise questions about KPMG's independence in conducting the highly sensitive investigation.
Lord Stevenson told MPs on the Treasury Select Committee yesterday that the Financial Services Authority (FSA) was satisfied with the KPMG report and regarded the matter as closed. He described it as "independent".
Mr Moore, the head of risk at HBOS from 2002 to 2005, accused HBOS and its former chief executive, Sir James Crosby, of fostering a culture where growth and sales took precedence over financial prudence and of stamping on any challenge to that philosophy.
Sir James stepped down today as the deputy chairman of the FSA.
Mr Moore had previously worked at KPMG as a partner in the financial services practice from 1995 to 2002, adding to the potential conflict of interest.
Sources at KPMG said that it was well able to manage the potential conflict of interest.
The investigation is understood to have been conducted by its forensic team, which is separate from its audit partners.
HBOS, which is now part of Lloyds, declined to comment
