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September 28, 2004 at 08:00 PM
KPMG L.L.P., New York, has settled a lawsuit stemming from the 2000 failure of General American Life Insurance Company, St. Louis, regulators say.[@@]
State liquidators with the Missouri Department of Insurance sued the accounting firm in a state court in Jackson County, Mo., in December 2002. The liquidators accused KPMG of being negligent in its performance as General American’s auditor.
General American ran into financial trouble in 1999 when it was unable to meet the demands of institutional investors for immediate payment of principal and interest on its guaranteed investment contracts. The investors sought repayment of $6.5 billion for the GICs after the company’s ratings were downgraded.
A spokesman for the state insurance department says KPMG agreed late last week to settle the matter for $18 million. Although the firm agreed to settle at the urging of the court, KPMG did not admit any wrongdoing, the department spokesman says.
The department alleged that KPMG failed to advise General American of the high risks of the GICs and did not exercise due care in auditing General American.
