KPMG has disputed ASIC’s action to recover compensation for Westpoint investors, with the accounting firm initiating a High Court challenge against the corporate regulator.
KPMG is seeking a declaration that section 50 of the ASIC Act, which empowers the regulator to begin and carry on a proceeding in the name of a company, is unconstitutional.
ASIC confirmed it would vigorously defend the challenge and maintains that section 50, in empowering it to bring proceedings for the benefit of investors who have suffered loss and might otherwise never be compensated, is valid.
However, if KPMG’s declaration is successful, ASIC will not have powers to continue the action to obtain compensation against KPMG for the benefit of Westpoint investors.
In October 2008, ASIC commenced action against KPMG’s auditing of the companies in the Westpoint Group. The action claims compensation in the order of $200 million.
ASIC is claiming negligent conduct by KPMG for the audits of financial accounts of various Westpoint companies for the years ended 30 June 2002, 2003 and 2004.
The regulator also alleges KPMG should have notified ASIC that it had grounds to suspect that breaches of the Corporations Act were taking place within the Westpoint Group, including breaches of director’s duties and laws against insolvent trading.
If successful, the action could potentially benefit up to 80 per cent of investors in Westpoint.
