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April 30, 2008

Investors sue KPMG Canada for C$132m

By Nicholas Moody

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

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