(OTS) Thomas P. Mason (202) 906-6688
(RTC) Felisa Neuringer (202) 416-7556
(FDIC) David Barr (202) 898-6992
FOR $186.5 MILLION
WASHINGTON, D.C., August 9, 1994 -- KPMG Peat Marwick (Peat
Marwick), one of the nation's largest accounting firms, has agreed
to pay $186.5 million to the federal government to settle claims
based on alleged accounting and auditing failures at financial
institutions it audited.
In a global settlement of all claims and charges brought by
federal regulators, the accounting firm has agreed to pay $128
million in cash to the Resolution Trust Corporation (RTC), $58.5
million to the Federal Deposit Insurance Corporation (FDIC), and
consented to a cease and desist order of the Office of Thrift
Supervision (OTS). The payment to the FDIC will consist of $23.5
million in cash and $35 million in a two-year note.
The settlement resolves five pending suits brought by the RTC,
two suits brought by the FDIC, and settles all claims for
professional work Peat Marwick did for financial institutions that
failed on or before April 4, 1994.
The OTS cease and desist order requires specific changes in
accounting policies for future audits of federally insured depository institutions during the next five years.
The OTS order specifies levels of experience in insured
depository institution audits for partners, engagement partners and
managers, and increases the required experience levels for audits
of thrifts with assets exceeding $500 million. The order also
calls for Peat Marwick to comply with specific professional
standards and spells out quality control functions to be performed
by partners on each insured institution audit.
The RTC and the FDIC charged Peat Marwick with accounting
malpractice. OTS charged Peat Marwick with:
* Improper workpaper and document retention practices,
including violations of Generally Accepted Accounting Standards
(GAAS) and regulations, that impacted on OTS' ability to review
accounting policies and practices of former clients and failed
* Failure to mark trading accounts to market in accordance
with Generally Accepted Accounting Practices (GAAP).
* Misapplication of GAAP requirements relating to accounting
for acquisitions of savings and loan associations.
* Improper accounting for profits on sales of real estate
and exchanges of assets.
* Failure to audit allowances for loan losses in accordance
Peat Marwick had denied the claims made by the FDIC and RTC
and stipulated in its offer of settlement to the OTS order that it
neither admitted nor denied the OTS charges.