Thomas P. Flanagan, a former partner and vice chairman of Deloitte & Touche, has been barred from practicing before the SEC over dozens of cases in which he owned or controlled securities in audit clients and concealed his ownership, lied to the firm about his compliance with its rules and used its services to prepare tax returns that covered up the improper trades. He and his son Patrick were also charged with insider trading today and agreed to pay a $1.1 million settlement. A 30-year Deloitte partner, Flanagan resigned from the firm in the fall of 2008 before his own firm sued him over these issues.
The SEC filings says that between December 2003 and July 2008, Flanagan made 71 trades in which he purchased stock or options in Deloitte audit clients, 62 of which were securities of such clients while serving on Deloitte's engagement team as an advisory partner. The decision, which also included an order for Flanagan to cease and desist such actions, was made after Flanagan made an settlement offer in which he did not admit or deny any wrongdoing.
Flanagan was accused of holding securities in seven companies while serving as Advisory Partner on the audit engagement. These were Sears, Best Buy, USG, Walgreen, Berkshire Hathaway, AllState and ServiceMaster.
The complaint said Flanagan circumvented Deloitte's internal controls by failing to report trades and then lied in his Independence Representations in each year from 2004 through 2007. In preparing tax returns for those same years, he utilized Deloitte Tax LLP and provided names of companies for which he could trade securities in place of those in which he actually made improper trades.
Thomas Flanagan consented to pay $557,158 in disgorgement fees with prejudgment interest and a penalty of $493,884. Patrick Flanagan agreed to pay $65,615 in disgorgement fees and interest and a penalty of $57,656. Neither man admitting or denied any of the SEC allegations.
