New York (Dec. 18, 2002) -- KPMG vigorously defended itself Tuesday against a Missouri lawsuit which charges that the firm advised an insurer to sell a risky investment product that ended up forcing the company to liquidate.The Missouri Department of Insurance sued the accounting firm last Thursday, alleging it didn’t disclose the risk of client General Life Insurance’s Stable Value funding agreements.
"We deny allegations that KPMG contributed in any way to the liquidity issues faced by General American in 1999," said KPMG spokesman Bob Zeitlinger. "We stand behind the work we performed and will defend ourselves vigorously."
The product apparently sold well because it paid fairly high rates and customers could cash out with only a week’s notice. But a ratings downgrade led to a stampede of redeemers. Although the insurance company could have paid off investors over time, it couldn’t meet the requests to cash out in only seven days, forcing the company to go into receivership.
-- Tracey Miller-Segarra
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