A former Merrill Lynch executive organized IPOC in 2000 after the Bermuda government issued a license to the company to operate as a mutual fund. Three years later, after Bermuda regulatory authorities discovered that the company's founder was a convicted felon, he was dismissed, and Jeffrey Galmond took control of the company.
Over the next few years, IPOC grew dramatically. The company's principal investments were in Russian telecommunications companies that were a product of the Russian Federation's "privatization programme" during the 1990s. That program converted thousands of state-owned agencies within the former Soviet Union into privately-owned companies and was intended to distribute the ownership interests of those new companies to millions of Russian citizens. The majority of those ownership interests, however, were usurped by individuals who had held high-ranking positions in the former Soviet government or who were friends, family members, and business associates of such individuals.
By 2004, the Bermuda government was alarmed by rampant rumors and allegations that IPOC was not operating as a mutual fund but rather was a money-laundering "criminal" enterprise. Critics of the company insisted that Jeffrey Galmond and other IPOC executives served only as figureheads and that IPOC was actually owned and controlled by Leonid Reiman, Russia's Telecommunications Minister.
Reiman was a longtime friend and close ally of Russian President Vladimir Putin, who had appointed him to oversee Russia's emerging telecommunications industry.
Allegedly, Reiman had used his position to take control of Russia's key telecommunications companies and place them under the IPOC corporate umbrella. Reiman disputed such claims and insisted that he was not involved with IPOC and that Galmond was the company's principal executive and owner.
To squelch the controversy, IPOC's executives hired Ernst & Young (E&Y) to "audit" their company's business affairs and issue a report on its findings. Copies of the Ernst & Young report obtained by third parties caused even more questions to be raised about IPOC's legitimacy. The E&Y report documented a number of suspicious cash transfers that appeared to have no credible business purpose.
For decades, Bermuda's political leaders have taken strenuous measures to prevent their country, which is technically a British territory, from becoming a headquarters for companies controlled by organized crime syndicates. Several small nations in the nearby Caribbean, on the other hand, have bank secrecy laws that serve as an invitation to such enterprises. Increasing concern regarding the true nature of IPOC's operations goaded Bermuda's Minister of Finance in 2004 to retain KPMG to investigate the company. Four years would pass before Bermudan authorities would take action based upon the results of KPMG's investigation. In the meantime, another headline-grabbing controversy involving IPOC erupted.

Questions
1. Bermuda's Minister of Finance retained KPMG to "audit" the business affairs of IPOC to determine whether the company was a criminal enterprise or a legitimate business operation. What type of professional service was KPMG providing during this engagement? Did the engagement qualify as an assurance, attestation, audit, or consulting engagement? Defend your answer.
2. What moral, ethical, and professional responsibilities did Guy Enright face when he was asked to turn over confidential documents to the individuals who were representing themselves as intelligence agents for the British and the U.S.
governments? Which of those responsibilities did he violate, and which did he uphold?
3. Compare and contrast the conduct of Guy Enright and Nick Day. Which of these individuals was most ethical (or least unethical)? Defend your answer.
4. How would you respond if you faced a set of circumstances similar to those faced by Guy Enright?
5. KPMG filed a civil lawsuit against Diligence, Inc., in 2005, after learning of the latter firm's "sting operation" that focused on Guy Enright. What rationale or legal principles would have been the basis for that lawsuit? Do you believe that KPMG would have been successful if it had pursued that lawsuit rather than settling it out of court? Assuming that KPMG believed it would ultimately win a civil judgment against Diligence, why would the accounting firm choose to settle the lawsuit out of court? Explain.