KPMG UK has vigorously defended its role as auditor of Bernard Madoff's London operations declaring allegations made in a lawsuit lodged in New York as "wholly without merit".

It emerged this morning that a lawsuit brought by investor Jay Wexler had been expanded to include KPMG in the UK and KPMG in the US for their audits either of the business run by Madoff in London, or of hedge funds that invested in the Madoff fund.

A statement issued this afternoon by KPMG UK said: "KPMG considers the allegations in the complaint to be wholly without merit and will defend them vigorously.

"The complaint cites KPMG in its capacity as statutory auditor of Madoff Securities International Limited (MSIL), a London based company directly owned by the Madoff family.

"KPMG acted in this capacity for several years and issued unqualified audit opinions on MSIL’s financial statements.

"We are not aware of any suggestion that the financial statements of MSIL contain errors."

The lawsuit claims that KPMG UK should have spotted that a fraud was underway in the US because funds were transferred into MSIL London accounts from Madoff in New York.

The suit quotes Madoff from his guilty plea in which he says he used the transfer of funds to London as part of an artifice to make his business seem like it was involved in genuine trading.

KPMG is named in the lawsuit along with JP Morgan and Bank of New York Mellon and a number of individuals.

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Madoff lawsuit attacks KPMG UK