One-time PCAOB, KPMG Exec Gets Her Fraud Convictions Thrown Out

Another former KPMG LLP executive’s convictions have been vacated in the wake of a 2022 Second Circuit decision limiting the scope of the federal wire fraud statute.

Because Cynthia Holder’s convictions relied on “the misuse of intangible regulatory information to satisfy the wire fraud statute’s property element,” they can’t stand, U.S. District Court for the Southern District of New York said.

The accounting firm’s former executive director has already served her eight month prison sentence and supervised release term. Even so, the writ of coram nobis vacating her guilty plea and criminal judgment helps to limit the collateral consequences of the conviction, including difficulty getting a job, securing a loan, obtaining insurance coverage, and the loss of civil liberties, according to the court.

Holder pleaded guilty before Judge J. Paul Oetken in 2018 to conspiracy to defraud the U.S. Securities and Exchange Commission, conspiracy to commit wire fraud, and two substantive counts of wire fraud.

Holder and several other KPMG employees had been accused of scheming to steal non-public information in order to game Public Company Accounting Oversight Board inspections.

Before being recruited to join KPMG in 2015, she’d worked as a PCAOB inspections leader.

Prosecutors claimed that she fed KPMG confidential information about pending inspections while still employed at PCAOB and, after joining the accounting firm, had one of her former colleagues send her confidential information about upcoming inspection selections for KPMG audits.

Prosecutors claimed KPMG was trying to improve after several years of performing poorly in inspections.

Three others who pleaded guilty in connection with the scheme—David Britt, Brian Sweet, and Thomas Whittle—have likewise had their convictions tossed.

Additional Relief

Although not affected by the Second Circuit’s decision in United States v. Blaszczak—which held that intangible regulatory information isn’t “property” for purposes of the wire fraud statute—Oetken also vacated Holder’s conviction for conspiracy to defraud the SEC.

Two of Holder’s co-defendants who had proceeded to trial were acquitted of that charge, and the government didn’t insist that another co-conspirator plead guilty to that count when he pleaded without a cooperation agreement, Oetken said.

“In the particular circumstances of this case, it is not in the interests of justice to leave Holder worse off than her co-defendants simply because she pleaded guilty,” he said in the order, signed Wednesday and entered Thursday.

The government has dismissed, with the court’s approval, indictments of two defendants—David Middendorf and Jeffrey Wada—who had appeals pending following their convictions at trial.

Holder is represented by Thompson Hine LLP and Schlam Stone & Dolan LLP.

The case is United States v. Middendorf, S.D.N.Y., No 1:18-cr-00036, 3/7/24.