A California judge sanctioned accounting firm KPMG last week for hiding documents in a $50 million accounting malpractice suit brought by computer case and accessory supplier Targus Group International Inc.

An Orange County Court district judge ruled that KPMG "withheld or delayed in producing many responsive documents in order to gain unfair advantage," and said that Targus will be able to introduce the matter into the trial set to begin in September. KPMG was also ordered to pay Targus $30,000 for "abuse of the discovery process."

Targus' former chief financial officer, William Anthony Lloyd, pleaded guilty to 15 counts of wire fraud in 2001, after embezzling about $40 million from the company. To hide the fraud, he created false entries in Targus' books beginning in 1997, which were audited by KPMG from 1993 through the fall of 2001. Targus' original complaint alleged professional malpractice by KPMG for not detecting the fraud, and said that unskilled and inexperienced auditors had been assigned to the account. Targus had alleged that KPMG and its counsel intentionally hid and failed to produce critical documents regarding the accounting firm's audit and business policies, as well as the training programs in effect from 1996 to 2001. Targus later was able to discover the existence of the documents, most stored on CDs in a KPMG library.

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