Ex-Deloitte Partner and His Son Charged with Insider Trading

Lucas Gilmore, “Big 4″ observer
August 05, 2010 /

The SEC (US Securities and Exchange Commission) has reported that a former partner at Deloitte and his son have been charged with insider trading in securities.

Both of them have been accused of insider trading with several of the audit clients of the firm.

Deloitte is one of the biggest of audit firms and is a member of the Big 4.

The complaint filed by SEC states in detail as to how Thomas Flanagan, who is a Chicago-based former partner at Deloitte traded in securities while he served as a liaison between Deloitte’s audit engagement teams and the clients’ companies’ management teams.

SEC has said that Flanagan made a profit of $430,000 (£270,592).

Flanagan had worked with Deloitte for 38 years.

In the role which he had held during the time of the charge, Flanagan had access to the advance earning results between the years 2005 and 2008. He also had confidential information from the audit engagements that Deloitte had with companies such as Sears, WalGreen and Best Buy. Flanagan also had access to information regarding the firm’s consulting engagement with Motorola.

Flanagan has also been charged of tipping off his son, Patrick Flanagan, who has been charged with trading by using confidential company information.

Flanagan circumvented Deloitte’s independence controls and concealed his insider trading in securities of Deloitte’s clients. He also lied to Deloitte about his compliance to laws of the company as well as failed to report the prohibited trades.

To settle the charges made by the SEC, the father and son due have agreed to pay a fine of $1.1 million.

Robert Khuzami, who is Director of the SEC’s division of enforcement said in a statement that “‘Flanagan’s insider trading violated one of the most fundamental rules of public accounting”.


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