According to KPMG, a Bloomberg story on May 3, and subsquent media reports, took "out of context" an internal memo written by O'Kelly to KPMG employees that referenced the meeting.

"The memo was on another subject, describing the firm's work in dealing with former client Xerox Corp. and the positions that the firm had taken publicly with regard to Xerox," said KPMG. "The meeting at the SEC was referenced by Mr. O'Kelly in the concluding sentences of that relatively lengthy memo."

KPMG insisted the meeting was no more than an introduction between Pitt and O'Kelly, who just recently took the reigns as chairman of the accounting firm.

"The meeting was arranged at my request to introduce myself to Chairman Pitt as KPMG's new Chairman, and to ensure that Mr. Pitt was aware that my number one priority was for the firm to take a leadership position in helping advance reform for the industry," said O'Kelly. "I referenced a potential proceeding against KPMG at the very end of our meeting and that KPMG would take all necessary steps to protect our firm and its reputation."

Pitt, who has been criticized in recent months for his private meetings with other former clients on matters pending before the Commission, denied discussing Xerox with O'Kelly.

In other news, KPMG said that it laid off 90 employees at its operations in the Northeast, citing economic uncertainty for the move. The company only recently offered jobs to 240 partners of Arthur Andersen to accommodate some 60 clients that have abandoned Andersen and joined KPMG. 

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