KPMG Canada faces a C$132 million ($134 million) class action
suit following the 2005 collapse of offshore hedge fund Olympus
United Funds Corp (Olympus), which was audited by the Big Four
firm.

The action was filed at the Quebec Superior Court this month on
behalf of proposed lead plaintiff Sheila Calder and 1,900 Canadian
retail investors. Calder claimed she lost almost C$214,000 that she
had invested with Olympus, a subsidiary of Norshield Financial
Group, when it collapsed in 2005.

It is the second time in less than a year the Big Four firm has
been implicated in proceedings. KPMG Canada was confronted with a
class action lawsuit for C$20 million filed by a former employee in
the Superior Court of Ontario in August last year. The employee
claimed that KPMG had not paid overtime to non-qualified staff. The
Ontario class action prompted the firm to investigate the claims
and develop an Overtime Redress Plan, which it announced in
February.

Stinging allegations

The latest action claimed KPMG failed to fulfil its obligations
as an auditor of Olympus from 2000 to 2003. The court documents
alleged that KPMG’s long term involvement with Norshield Financial
Group made it aware of the misrepresentations and inflated value of
the assets of Olympus. It said KPMG was liable towards the Canadian
retail investors in Olympus as a result of the foregoing absence of
disclosure, negligent and fraudulent representations, poor
accounting practices and improper audit or verification. The
motions asked the court to grant class action status and order KPMG
to pay C$132 million in damages to the investors for the loss of
the aggregate value of their shares.

Julie Bannerjea, spokesperson for KPMG Canada, said: “KPMG
stands by the audit work performed for Olympus and believes that
the complaint has no merit. We will defend ourselves
vigorously.”

The lawyer acting for Calder said he expected the consideration
of the suit to take 60 to 90 days. A judge of the Quebec Superior
Court will be designated shortly, he said.

Nicholas Moody