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With a $40 million claim hanging over its head, Cingular Wireless turned to KPMG to provide expert litigation support for a federal suit pending in a California courtroom. A year and a half later, Cingular’s lawyers say the Atlanta-based wireless telecommunications company received nothing in return for payments totaling $422,690. Cingular accuses KPMG of providing unsatisfactory work, while the accounting giant and a firm involved in related litigation say Cingular won’t pay its bills. “We regret that we had to file the lawsuit, and we hope to resolve it promptly,”said Paul L. Weisbecker, litigation counsel for Cingular. The attorney declined to answer any more questions for this story, saying, “You’ve got my little statement.” The dispute with KPMG stems from a federal suit in the Central District of California in which Cingular made similar claims of dissatisfaction against another company. In both cases, Cingular signed a contract and then alleged it was overbilled for unacceptable or incomplete work. In the federal action, Cingular was sued and filed a counterclaim against The Consulting Group, a California company that contends it is owed approximately $40 million for services rendered to Cingular. The Consulting Group v. Cingular Wireless, No. 8:03CV00109 (C.D. Cal. filed Feb. 4, 2003). According to court documents, The Consulting Group “provides services related to the development, construction, modification and maintenance of cellular antenna sites.” The California firm signed a contract with Cingular in May 2001 to perform site acquisition services for cellular antenna projects. Cingular, according to court documents, alleges it paid The Consulting Group more than $65 million for work done from the time the contract was signed through the early part of 2003. The Consulting Group sued to recover an additional $40 million it says Cingular owes. When Cingular initially failed to pay the final $40 million, The Consulting Group said it was told that the payments were being withheld because of budget constraints and that Cingular intended to maintain The Consulting Group as the prime provider of such services in the future. When Cingular’s money never surfaced, the California company filed suit. Cingular filed a counterclaim, alleging The Consulting Group submitted false invoices for services that were never done or submitted invoices with inflated prices. WORK DESCRIBED AS ‘WEAK’ Almost immediately after The Consulting Group filed the federal suit, Cingular retained KPMG to provide “financial and data analysis services” and litigation support. Neither party associated with the suit would disclose the exact nature of KPMG’s work, but in the suit Cingular said it paid KPMG $422,690 for work done through May 2003. Cingular v. KPMG, No. 2004VS072245 (Fult. St. filed Sept. 17, 2004). According to its suit, Cingular called a meeting with KPMG in Los Angeles on June 19, 2003, to review the auditor’s findings. KPMG reportedly had developed only a “very preliminary view and analysis of the numbers at issue”and still had a lot of work to do at the time of the meeting. Cingular representatives scheduled a follow-up meeting with KPMG in Los Angeles in early July 2003. At that meeting, KPMG staff sat down with Cingular’s internal auditor, who later determined that KPMG demonstrated “extremely weak analytical capabilities”in relation to the work needed for the federal litigation. “KPMG was not able to demonstrate that it had the ability to determine the amounts of, or to test the validity of, certain numbers that are at the core of Cingular’s dispute with [The Consulting Group],”the complaint reads. “In fact, Cingular’s Internal Auditor spent much of the meeting leading a discussion with KPMG — a firm hired for its purported expertise in financial and data analysis — as to how KPMG could develop a work plan designed to determine the crucial numbers at issue.” In addition to learning of the allegedly unsatisfactory work, Cingular found out that KPMG’s tab for June totaled more than $228,000. That bill remains unpaid. A day after the second meeting, Cingular representatives in Atlanta asked KPMG to cease working on the project temporarily. They also requested KPMG reduce its fees. Cingular’s in-house counsel, Robert P. Marcovitch, called Ronald Durkin, the Los Angeles-based KPMG partner in charge of the project, and left a message saying he wanted to discuss the “fees issue and related performance issues,” according to the complaint. The complaint says that Durkin did not return the phone call, but after Marcovitch sent an e-mail two days later, the KPMG partner wrote back to “express disbelief”and reject Cingular’s proposal. Marcovitch followed up the next week by sending another e-mail to Durkin. The Cingular lawyer said in the complaint that he received no response. “Instead, the next material communication from KPMG was another invoice,”the complaint states. KPMG: NO MONEY, NO DATA At this point, Cingular opted to replace KPMG as its consulting expert in the federal litigation. However, Marcovitch and Cingular’s chief litigation counsel, Neal S. Berinhout, both of Atlanta, called Durkin and asked him to release a database they described as “the only product of KPMG’s work that had any actual value to Cingular.” The suit states that Durkin declined to hand over the database until KPMG’s invoices were paid. Cingular’s lawyers balked at paying KPMG any more money, saying they already had spent too much for unsatisfactory work. Ultimately, KPMG refused to turn over the database, and Cingular decided to file suit in Fulton State Court. “KPMG’s conduct operated to Cingular’s prejudice, causing a seven-month delay in both its ability to defend against [The Consulting Group's] claim and its prosecution of its own claim, and causing Cingular to expend $422,690 in consulting fees and expenses for which Cingular ultimately received nothing,” the complaint states. The Daily Report left three messages at Durkin’s office seeking comment for this story, but he never returned any of the calls. Besides Weisbecker, none of the attorneys working for Cingular, including Berinhout, responded to requests for interviews. Also, Cingular’s public relations regional manager, Dawn Benton, declined to answer questions for this story. A spokesman for KPMG, Tom Fitzgerald, declined to discuss the suit, the likelihood of a counterclaim or the specifics of KPMG’s work in the California litigation. In response to the Daily Report‘s questions, Fitzgerald said only, “KPMG stands behind the quality of its work. These allegations are without merit.” KPMG, a Big Four accounting firm, provides audit, tax and business advisory services in 159 countries and employs nearly 100,000 people, including 1,600 partners in the United States. Cingular, a joint venture between SBC Communications and BellSouth, serves more than 25 million voice and data customers across the United States.

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