A California man has pleaded guilty to having profited more than $1 million from insider information provided by his golf buddy, a former senior partner at KPMG LLP in Los Angeles. 

Bryan Shaw, who owned a jewelry store in Encino, Calif., admitted that he used the confidential information provided by Scott London to make illegal stock trades involving public companies including Herbalife Ltd. and Skechers USA. KPMG abruptly resigned as auditor to both companies on April 8, citing concerns that "the firm’s independence has been impacted as a result of" London’s activities. The firm fired London.

On Monday, Shaw pleaded guilty to one count of conspiracy, admitting that he plotted with London to commit securities fraud.

"As part of Mr. Shaw’s ongoing efforts of cooperation with the government, he has agreed to enter into a plea agreement and plead guilty to the filed conspiracy charge," his attorney, Nathan Hochman, a partner at Bingham McCutchen in Santa Monica, Calif., said.

Shaw agreed to disgorge nearly $1.3 million in illegal stock trades. He admitted that he gave London more than $60,000 cash, often in bags of $100 bills on streets near his jewelry store, in exchange for confidential information about KPMG’s clients. He also admitted that he gave London a $12,000 Rolex watch, jewelry and concert tickets.

Shaw faces up to five years in prison and a $250,000 fine.

London, former chief of KPMG’s audit practice for the southwestern United States, was charged on April 11 with one count of conspiracy to commit securities fraud. He is due to enter a plea on May 17.

"These two men were close friends who shared dinners, concerts, sporting events and secret information that brought profits to each of them," U.S. Attorney André Birotte Jr. said in a prepared statement. "London provided, and Shaw was all too happy to use, proprietary information that should have remained confidential. These men broke ethical rules and criminal laws for the sole purpose of lining their pockets with illegal profits."

According to federal prosecutors, Shaw provided investigators with recorded telephone conversations in which London passed along confidential information, often from press release drafts, about Herbalife and Deckers Outdoor Corp. Shaw also was cooperating with the FBI during two cash exchanges.

The U.S. Securities and Exchange Commission also has filed charges against both men. In that case, Shaw admitted his "incredibly stupid actions."

"There is no excuse for my wrongful conduct," he wrote. "I expect that my actions will result in significant civil and criminal consequences, but I realize that this is the painful price I will pay for my transgressions."

Contact Amanda Bronstad at abronstad@alm.com.