KPMG Siddharta: An Alleged Bribe on the Accounting Firm’s Invoice

The KPMG Siddharta FCPA case concerned an alleged $75,000 bribe to cut an Indonesian client’s tax assessment from $3.2 million to $270,000. The Securities and Exchange Commission alleged that an accounting firm’s invoice hid the intended payment as professional services. Someone who knew why the invoice was approved could explain what its description left out.

The SEC’s September 2001 account identified KPMG Siddharta Siddharta & Harsono as a public accounting firm in Jakarta and an affiliate of KPMG International. Its client was PT Eastman Christensen, an Indonesian company beneficially owned by Baker Hughes. The alleged payment concerned that client’s Indonesian tax assessment.

What the Tax Payment Was Supposed to Change

According to the Securities and Exchange Commission, the accounting firm agreed to arrange the payment to influence the official handling its client’s tax assessment. The complaint described a transaction in 1999 in which a partner authorized the firm’s personnel to bribe the official on the client’s behalf. The government decision being bought, in that account, was the size of the tax bill.

The alleged approval condition was unusually revealing. The partner told the firm’s personnel that Baker Hughes should communicate directly with the accounting firm, rather than through the local client, if it wanted the payment made. According to the SEC’s description of the complaint, the firm was willing to pay the official if that direct request came from Baker Hughes.

That detail puts the parent company’s instructions into the transaction. An engagement-team employee could know who requested the payment, who agreed to arrange it and why the local company’s request was insufficient. Those are different facts from the name of the vendor receiving the client’s money.

The Securities and Exchange Commission reported that the client received the reduced assessment on March 23, 1999. In the alleged arrangement, the accounting firm would bill its client for money intended for the official deciding what that client owed. We would call that buying a tax decision, billed as professional advice.

How the Invoice Hid the Payment

The SEC alleged that the partner agreed with the firm’s personnel to generate an invoice combining the official’s payment with the firm’s fees. The bill included actual fees and applicable taxes alongside the money intended for the official. The agency then followed the invoice into the client’s accounts:

In the government’s account, the allegedly false description traveled from the invoice into the ledger. The client recorded the whole transaction as professional services, concealing the different purposes within the bill. A tax specialist familiar with the proposed payment would understand something that the expense description did not disclose.

That is why finance and accounting knowledge matters beyond checking whether an invoice was received and paid. The firm’s work, the official’s intended payment, the authorization and the client’s accounting entry each explain a different part of the same transaction. Matching the amount paid to the amount billed would leave the alleged disguise intact.

What Conduct Can Violate the FCPA?

Authorizing a payment to buy a foreign official’s decision for a business can violate the Foreign Corrupt Practices Act. The KPMG Siddharta allegations show that issue alongside a second one: books, records and accounting controls that obscure what a payment was for.

The books had to show what the money was for. In the Securities and Exchange Commission’s account, the client recorded money intended for a tax official as professional services. The alleged problem was visible in the difference between what the partner agreed to arrange and what the client recorded.

The Justice Department’s September 2024 compliance evaluation asks about a third party’s business purpose, compensation and actual performance. Applied to the alleged arrangement here, those questions concern what the accounting firm was being paid to do and how much of the bill was intended for someone else.

The Accounting Firm, Its Partner and Baker Hughes

The Securities and Exchange Commission and the Justice Department jointly sued the accounting firm and its partner in federal court in Houston in 2001. The Commission described it as the agencies’ first joint civil action. That joint filing reached the service provider and the person who allegedly authorized its personnel to arrange the payment.

The Securities and Exchange Commission announced that the firm and partner had agreed to a court order permanently barring bribery, false books and failures of accounting controls, including helping others commit those violations. The partner’s role matters because the government’s account places his authorization before the invoice and the client’s accounting entry.

The Securities and Exchange Commission also brought a separate civil action against two Baker Hughes executives over their alleged authorization of the payment through the accounting firm. In a related settled administrative proceeding against Baker Hughes, the Commission said its order found that the company’s chief financial officer and controller authorized the Indonesian payment. The accounting firm’s willingness to arrange it and the parent company’s senior officers’ authorization were separate decisions inside the same alleged transaction.

What a Tax or Finance Insider Can Connect

An insider’s value in a transaction like this lies in connecting the tax discussion to the payment and the books. The KPMG Siddharta allegations identify the essential links: the assessment the client wanted changed, the request for the parent company’s direct instruction, the partner’s approval, the invoice and the client’s entry recording the payment.

The work crosses company boundaries. An accounting-firm employee may know what the engagement partner agreed to arrange, while a client-side tax or finance employee may know why the company approved the bill. Our whistleblower experts work with you on what your knowledge explains and how it connects to the payment evidence.

The 2019 working paper Do Corporate Whistleblower Laws Deter Accounting Fraud?, hosted by MIT Sloan, found that firms newly exposed to the SEC whistleblower provision had a 7% reduction in estimated fraud probability relative to firms already exposed to state False Claims Acts. The study used financial-statement measures to estimate fraud risk. Its finding supports the value of whistleblower incentives before misconduct becomes an enforcement case.

For foreign-bribery information, our whistleblower experts help you build your case and assess the SEC whistleblower program with you. A different program addresses fraud against the U.S. government: a whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know What the Invoice Meant

If you know an accounting or consulting bill concealed a payment for official influence, speak to one of our whistleblower experts about what the engagement was really for. We build the case with you around the authorization, the money and the accounting, and bring in FCPA whistleblower lawyers who understand payments through professional advisers. We stay beside you throughout the process, working to turn your inside knowledge into your strongest FCPA whistleblower case.