Kevin Reed, Accountancy Age, Thursday 5 August 2010 at 09:45:00

Former Deloitte & Touche partner Thomas P Flanagan settles SEC charges of insider trading of audit clients


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