Ex-KPMG auditor's lawyer says inside trader cooperating with FBI

A former KPMG senior audit partner who resigned after admitting to passing on inside information about corporate clients Herbalife Ltd and Skechers USA Inc was betrayed by the golf partner he had been tipping, the auditor's lawyer said.

The unidentified man led federal investigators to former KPMG partner Scott I. London, after being approached by agents with the FBI, said Harlan Braun, the lawyer representing London, Wednesday.

The man, who allegedly received inside information on the companies from London, is cooperating with federal investigators, Braun said.

Braun said London had received money in exchange for his inside tips. "It's a clearer case" in which both parties knew they were violating insider trading laws, he noted. "This was a pretty contained investigation."

In an interview with The Wall Street Journal on Tuesday, London said he wasn't initially aware his friend was trading on the information.

London left KPMG last week after admitting to sharing non-public information about the nutritional products group and footwear maker with a golfing buddy who used it to trade stocks.

Braun said the recipient of the information, whose name he declined to provide, first ran into trouble when the brokerage firm he was using to make the trades got suspicious and refused to allow him to trade anymore.

Later, when he was approached by the agents with the Los Angeles division of the Federal Bureau of Investigation, London's friend agreed to cooperate, Braun said. The man then told the FBI London was the person giving him the non-public information.

It isn't clear when the FBI began its investigation or whether the brokerage alerted authorities about the trading. A lawyer for London's golf buddy could not be found.

A spokeswoman for the FBI in Los Angeles declined to comment on the investigation. Braun said his client is no longer talking to the media.

Herbalife and Skechers, both based in California, said separately on Tuesday that KPMG had quit as their auditor in connection with the leaks.

KPMG said in a statement late on Monday that the person who had leaked information about the companies had left the firm. Sketchers Chief Financial Officer David Weinberg on Tuesday identified the person as London.

London has made statements to the U.S. Securities and Exchange Commission as well as to criminal investigators.