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May 31, 2010

KPMG takes ASIC to court

KPMG Australia is challenging the constitutional right of the Australian Securities and Investment Commission (ASIC) to launch a A$200 million ($162 million) claim on behalf of investors against the firm in relation to the collapsed construction company Westpoint Group.

KPMG launched the challenge in the High Court of Australia. It is seeking a declaration that section 50 of the ASIC Act, which allows ASIC to take legal action, is unconstitutional.

The firm contends that the powers section 50 gives ASIC are contrary to the provisions of section 51 (xxxi) of the Constitution, and invalid.

If KPMG is successful in getting a declaration from the court, ASIC will not have the power to continue the action.

ASIC said it will vigorously defend against the constitutional challenge.

KPMG was sued A$200 million by ASIC in 2008 on behalf of investors for alleged negligent conduct in its audit of property company Westpoint Group, which collapsed in 2006 with losses of more than A$300 million.

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