Deloitte audit partner charged with insider trading by SEC

A former Deloitte & Touche partner and his son have been charged with
insider trading by US markets watchdog the
Securities and Exchange
Commission.

Thomas P Flanagan of Chicago is alleged to have traded in the securities of
Deloitte’s audit clients, often while serving as a liaison between the
companies’ management teams and the firm’s audit engagement staff.

This gave him access to advance earnings results and other non-public
information from Deloitte’s audit engagements with Best Buy, Sears and
Walgreens, as well as with its consulting with Motorola.

He also tipped his son Patrick T Flanagan who traded on the non-public
information.

They agreed to pay more than $1.1m () to settle the charges.

“Flanagan’s insider trading violated one of the most fundamental rules of
public accounting,” said Robert Khuzami, director of the SEC’s division of
enforcement. “All audit firms should learn from this unfortunate episode and
employ vigorous controls designed to ensure compliance with the SEC’s auditor
independence rules.”

According to the SEC’s complaint, Thomas Flanagan concealed his trades in the
securities of Deloitte’s clients and circumvented Deloitte’s independence
controls.

He failed to report the prohibited trades to Deloitte, lied to Deloitte about
his compliance with its independence policies, and provided false information to
Deloitte’s personal income tax preparers about the identity of the companies
whose securities he traded.

Merri Jo Gillette, director of the SEC’s Chicago regional office, said:
“Thomas Flanagan repeatedly betrayed his ethical responsibilities and his
clients’ trust by trading on confidential information to enrich himself and his
family.”

Further reading:

Ex-Citigroup
CFO pays $100,000 to settle SEC sub-prime charge

Dell
pays $100m penalty to settle accounting fraud charges

Bonus
tax costs Goldman Sachs $600m