The payments came in various forms. There were envelopes of $100 bills wrapped in $10,000 bundles. There were tickets to a Bruce Springsteen concert. There was a 2011 Rolex Cosmograph Daytona valued at $12,000.
Bryan Shaw, the owner and operator of a Los Angeles-area jewelry business, bestowed these gifts upon his longtime friend and golf buddy Scott I. London, a senior partner at the accounting giant KPMG. In return for such largesse, Mr. Shaw received secret information from Mr. London about KPMG clients, and earned more than $1 million illegally trading in the shares of publicly traded companies.
On Thursday, federal prosecutors filed criminal charges against Mr. London, laying bare a brazen two-year insider trading scheme. The Securities and Exchange Commission filed a parallel civil case against Mr. London and Mr. Shaw.
“London was honored with the highest trust of public companies, and he crassly betrayed that trust for bags of cash and a Rolex,†said George S. Canellos, the acting director of enforcement at the S.E.C. Acting Director of the Division of Enforcement, in a statement.
Mr. London and Mr. Shaw have already acknowledged their misconduct in statements issued through their lawyers.
“I regret my actions in leaking nonpublic data to a third party,†said Mr. London, 50, of Agoura Hills, Calif., in a statement made on Tuesday. Mr. London is expected to be arraigned on Thursday afternoon at Federal District Court in Los Angeles.
Mr. Shaw, 52, of Lake Sherwood, Calif., said he had accepted “full and complete responsibility for what I have done.â€
Indeed, Mr. Shaw began cooperating with the government in February after they confronted him with evidence of insider trading. He turned against his friend, recording telephone conversations and in-person meetings to help the authorities build a case against Mr. London.
Last month, Mr. Shaw participated in a sting operation to ensnare Mr. London. The F.B.I. provided Mr. Shaw with $5,000 cash, which was placed in manila envelope and then wrapped inside a black paper bag. Mr. Shaw met London in the parking lot outside of a Starbucks and handed him the bag. Federal agents took photographs of the exchange, one of which was included in the government’s complaint on Thursday.
Federal authorities opened up an investigation last July after the brokerage firm Fidelity raised red flags about activity in Mr. Shaw’s account. After Fidelity put Mr. Shaw’s account on hold, Mr. Shaw called Mr. London to express concern that they had been found out.
“Shaw said that London reassured him that there was no reason for concern, and explained that insider trading was like counting cards at a casino in Las Vegas - if you were caught they simply ask you to leave because they cannot prove it,†according to the government’s complaint.
Mr. London worked for nearly 29 years at KPMG, rising to a senior partner in the firm’s Los Angeles office, where he supervised more than 500 accountants and oversaw the audits for some of its most important clients. Over a two-year period, Mr. London secretly passed sensitive information to Mr. Shaw about a number of different KPMG clients, including Herbalife, the nutritional-supplement company; the footwear makers Skechers and Deckers Outdoor Corporation; and Pacific Capital Bancorp, the government said.
