UK - Accountancy giant KPMG has conceded it may be in the wrong in its dispute with former employees over its pension promise.
The firm’s recent admission – which comes in its annual accounts – follows its decision to replace Capita IRG Trustees as independent trustee of the KPMG Staff Pension Fund when it was on the verge of a High Court action to resolve the row.
The accountant has long insisted that the hybrid with-profits fund was a money purchase scheme and that the annual pension statements sent out to members indicated a notional pension on retirement – not, as the members say, a pension promise.
But KPMG’s annual accounts state that some of the provisions in the fund’s trust deeds and rules – which date back to 1949 – “may not accord clearly with current pensions legislation”. This is a reference to the Pensions Act (1995).
KPMG adds that while counsel opinion has backed its belief that the fund is a money purchase scheme, the courts may still decide otherwise.
The statement concludes: “If the fund is not a money purchase scheme then there may be a variety of fund implications, including a requirement to comply with minimum funding legislation.”
The dispute arose after the £300m scheme, which is invested in a pooled fund with Morley Fund Management, showed a £60m deficit last year.
Scheme members – who were told their pensions would be revised downwards by 20% – asked Capita Trustees to mount court action to get KPMG to honour the figures.
KPMG UK head of human resources Ian Robinson insists the firm wants a court hearing to resolve the dispute “as soon as possible”.
Separately, KPMG’s annual accounts reveal funding difficulties for its KMG Thomson McLintock Pension Scheme.
The scheme – under FRS17 assumptions – was valued at £58.8m with a £11.7m deficit in March and £50m with a £27.3m deficit by September. The scheme is closed to new members.
KPMG’s profits fell by 21% to £212m.
*More bad news for KPMG - this time in the US. The US Securities and Exchange Commission has filed fraud charges against the audit firm for its involvement in the Xerox accounting scandal.
Xerox agreed last April to pay a US$10m penalty to settle the SEC's charge that it had inflated earnings by billions of dollars.
The SEC is now alleging that KPMG was part of misleading investors and allowed Xerox to massage its accounts.
Whatever their size, companies should never assume they can get away with fraudulent practices or avoid moral responsibilities, said leading fraud lawyer and partner at Philippsohn Crawfords Berwald, Steven Philippsohn.
Shareholders and customers no longer want to be taken for a ride. There is a demand for honesty to prevail. Directors worldwide should sit up and take notice
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