KPMG wants clarity on GAIN Capital – TIBCO dispute

Maria Nikolova

KPMG remains in the dark as to whether it should comply with GAIN’s request to provide information about all audits it has conducted for TIBCO Software over the past five years.

Evidence to be provided by KPMG is now at the center of a legal dispute between TIBCO Software and online trading major GAIN Capital. Whereas TIBCO alleges that GAIN has overdeployed its software, the broker has filed counterclaims against TIBCO accusing it of fraud in the inducement and negligent misrepresentation.

The underlying dispute concerns software deployment. Beginning in 2008, GAIN licensed TIBCO software on a worldwide “enterprise basis,” meaning GAIN was entitled to deploy an unlimited number of software units during a designated “enterprise term,” the latest of which ended in 2012. According to TIBCO, GAIN did not have a license to deploy any units outside of that enterprise term- e.g. past 2012. In August 2016, KPMG audited GAIN and determined GAIN had deployed hundreds of software units outside of the enterprise term, that is, without a valid license.

This audit is now at the heart of the dispute. Both parties have served KPMG with subpoenas asking for information related to this audit. But GAIN wants to know more.

GAIN has filed the so-called “Non-Mutual Requests”, which call for KPMG to produce information related to every other audit that KPMG has conducted for TIBCO during the last five years. Specifically, GAIN seeks discovery related to (a) the number of audits KPMG has conducted on behalf of TIBCO, (b) fees associated with those audits, and (c) confidential third-party customer information such as the identification of TIBCO customers audited and the results of those audits.

According to GAIN, in reality, KPMG’s audit was fundamentally flawed and TIBCO has a pattern and practice of engaging KPMG to conduct audits of customers and deliberately giving KPMG incorrect instructions so that KPMG will inevitably find “overdeployment” of TIBCO software on its customers systems.

GAIN stresses that TIBCO has been involved in disputes with other companies involving strikingly similar fact patterns. GAIN contends that TIBCO’s deliberate conduct and use of KPMG to set up its clients for extortionate claims of overdeployment amounts to fraud.

TIBCO wants GAIN to withdraw these non-mutual requests. GAIN refuses to do so.

On Tuesday, August 14th, KPMG filed a letter with the California Northern District Court, noting that it has had some discussions with GAIN over its information requests but that these discussions have been put on hold as TIBCO seeks a protective order regarding the information GAIN wants to obtain.

It is apparent that KPMG has no clarity on how to proceed and that it will have to wait for the Court to decide on whether it should provide the details GAIN wants.

The case is captioned TIBCO Software Inc., v. Gain Capital Group, LLC (5:17-cv-03313).

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