KPMG faces $1-bn lawsuit over reckless audits

Accounting major KPMG is being sued for $1 billion (690 million pound) in damages from a trustee of collapsed American lender New Century Financial Corporation and has been accused of conducting "reckless and grossly negligent audits", a media report says.

Law firm Thomas, Alexander & Forrester LLP has filed two suits on behalf of the trustee -- one in California against KPMG LLP and another in New York against its parent, KPMG International, according to a report in The Guardian.

"Alan M Jacobs accuses KPMG of conducting 'reckless and grossly negligent audits' that failed to show the lender's financial problems," the report published online stated.

However, the auditing firm has denied any wrongdoings.

The lawsuits allege that KPMG LLP assisted in and certified "materially misstated financial statements", and that KPMG's international parent failed in its watchdog role and is responsible for "the severely reckless and grossly negligent acts of its agent", the report pointed out.

New Century had been US's second-biggest sub prime mortgage lender that mainly served people with poor credit histories but had to file for bankruptcy in April 2007.