The owner of a jewelry store who received confidential information from a former KPMG partner about audit clients has pleaded guilty to insider trading charges.

Bryan Shaw, 52, the owner of a San Fernando Valley jewelry store, was charged Monday with receiving insider information from a senior partner with KPMG LLP and using that confidential information about KPMG’s clients to make illegal stock trades that generated well over $1 million in illicit profits.

Shaw, of Lake Sherwood, Calif., was charged Monday in U.S. District Court in Los Angeles with one count of conspiracy. In a plea agreement also filed Monday morning, Shaw agreed to plead guilty to the felony offense and admitted that he plotted with the former KPMG partner, Scott London, to commit securities fraud. As part of the agreement with federal prosecutors, Shaw agreed to disgorge approximately $1,271,787 in illegal stock trading profits.

The federal charge of conspiracy to commit securities fraud carries a statutory maximum penalty of five years in prison, and a fine of $250,000 or twice the gross gain or loss from the offense.

Shaw is expected to make his initial appearance later this week in U.S. District Court.

In a criminal information and plea agreement filed Monday morning by federal prosecutors, Shaw admitted that he conspired with London to violate federal securities laws by using insider information to make illegal stock transactions in publicly traded companies. London, 50, of Agoura Hills, Calif., was charged last month in a criminal complaint with one count of conspiracy to commit securities fraud (see SEC Charges Former KPMG Partner with Insider Trading). London is scheduled to be arraigned in the case in U.S. District Court on May 17.

“These two men were close friends who shared dinners, concerts, sporting events and secret information that brought profits to each of them,” said U.S. Attorney André Birotte Jr. in a statement. “London provided, and Shaw was all too happy to use, proprietary information that should have remained confidential. These men broke ethical rules and criminal laws for the sole purpose of lining their pockets with illegal profits.”

The documents filed in the case against Shaw, as well as the 24-page affidavit in support of the criminal complaint in London’s case, outline how London provided Shaw with confidential information about KPMG clients, and how Shaw used this information to make trades that generated the illegal proceeds.

London was a senior partner at KPMG who supervised hundreds of accounting professionals at the firm and personally handled audits for major KPMG clients, including Herbalife Ltd. and Skechers USA, Inc. As a result of his position, London had access to confidential information about KPMG’s clients before that information was disclosed to the public.

In February 2013, Shaw began to cooperate with the government’s investigation. London’s alleged criminal conduct continued until March, when he was recorded in telephone conversations passing highly sensitive and confidential information to Shaw regarding upcoming earnings announcements for KPMG clients Herbalife, Ltd. and Deckers Outdoor Corporation.

During the course of the scheme, London, in some instances, called Shaw two to three days before press releases were issued for KPMG clients and read confidential information from the draft releases to Shaw, according to court documents. London allegedly also disclosed to Shaw confidential information about impending mergers concerning KPMG clients before that information was made public. At times, London even discussed with Shaw how to structure Shaw’s purchases of the stock in certain companies in order to protect them from being discovered.

Shaw admitted in his plea agreement that he gave London more than $60,000 in cash in exchange for confidential information about KPMG’s clients, typically meeting with London near Shaw’s Encino jewelry store to give him bags containing stacks of $100 bills. Shaw also admits in his plea agreement that he gave London a $12,000 Rolex Daytona Cosmograph watch, as well as jewelry and concert tickets, in exchange for the confidential information.

The criminal complaint against London details recorded conversations between Shaw and London in February 2013 in which London disclosed information about earnings announcement for Herbalife and Deckers. The complaint further details that on two occasions, acting at the direction of the FBI, Shaw met with London and gave him cash as payment for confidential information about KPMG clients.

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