The U.K. Financial Reporting Council has launched a disciplinary tribunal case against KPMG and its partner David Costley-Wood, alleging misconduct in relation to mattress producer Silentnight's pension fund.
In 2010 and 2011, KPMG enabled private equity firm H.I.G. Capital to acquire Silentnight without its pension fund liabilities to the detriment of the firm's pension fund participants, according to the case brought by the financial reporting watchdog's executive counsel.
Opening submissions by FRC's executive counsel showed that the auditor's conduct jeopardized the ability of Silentnight to continue operating so that it can be acquired without its pension fund liabilities.
KPMG and Mr. Costley-Wood breached fundamental principles of integrity, according to FRC as they provided misleading or incomplete explanations to the U.K. lifeboat pension fund for insolvent companies, the £32 billion ($42.2 billion) Pension Protection Fund, the Pensions Regulator, Silentnight and the trustees of the company's £100 million pension fund.
The calculation for pension benefits of the 1,332 participants of the Silentnight plan are now dependent on The Pensions Regulator's investigation and they may only receive compensation based on 90% of their full pension entitlement, FRC said.
For its part, KPMG denied the claims. "We cooperated fully throughout the FRC's investigation into this matter. As the Tribunal hearing is now underway, it is not appropriate for us to comment in detail, save to say we do not agree with the FRC's allegations, which are being defended in full," a spokesman for KPMG said.
Efforts to reach Mr. Costley-Wood were unsuccessful.