The U.S. Securities and Exchange Commission (SEC) Thursday charged a former partner at audit firm KPMG with insider trading violations.

The SEC charged that Scott London, who was in charge of KPMG’s Pacific southwest audit practice, tipped his friend, Bryan Shaw, with insider information about the firm’s clients, which enabled Shaw to make more than US$1.2 million in illicit profits by trading ahead of earnings or merger announcements. In a parallel action Thursday, the U.S. attorney’s office for the central district of California announced criminal charges against London, too.

The allegations have not been proven. According to the SEC’s complaint filed in federal court in Los Angeles, London began providing Shaw with nonpublic information in October 2010 and the misconduct continued for the next 18 months. It says that, as the lead partner on several KPMG audits, he was able to obtain material, nonpublic information about these companies prior to their earnings announcements or release of financial results; and that he also gained access to inside information about impending mergers involving two former KPMG clients.

“In exchange for the illegal trading tips, Shaw paid London at least $50,000 in cash that was usually delivered in bags outside of his Encino, Calif. jewelry store. Shaw also gave London an expensive Rolex watch as well as other jewelry, meals, and tickets to entertainment events,” the SEC says.

The SEC’s complaint charges London and Shaw with securities law violations, and seeks a final judgment permanently ordering them to disgorge ill-gotten gains plus pay prejudgment interest and financial penalties, and enjoining them from future violations. It also notes that its investigation, which began in mid-2012, is continuing.

“London was honored with the highest trust of public companies, and he crassly betrayed that trust for bags of cash and a Rolex,” said George Canellos, acting director of the SEC’s division of enforcement.