Deloitte accuses former partner of insider trading
Deloitte has filed a lawsuit against a former partner in its Chicago office, contending the man traded on inside information related to audit clients.
Thomas Flanagan, a 30-year Deloitte partner, allegedly bought stock in an unnamed publicly traded company one week prior to Walgreen's July 2007 announcement that it bought Option Care Inc., the Chicago Tribune reported. Flanagan, 61, served as advisory partner, managing the client relationship with Walgreens. He resigned abruptly in September, according to court documents.
While the SEC is looking into the matter, federal officials have not filed charges against Flanagan for buying or selling securities on non-public information, which is illegal.
Deloitte also accuses Flanagan of trading in securities of 12 or more audit clients between January 2005 and June 2008. He worked with seven of those clients. Walgreens, Allstate Corp., and USG Corp. stated in SEC filings that a Deloitte partner allegedly bought securities in their companies, but they all said the firm’s auditor independence remained intact.
Deloitte is accusing Flanagan of breach of fiduciary duty, breach of contract, and fraud. The firm wants repayment of Flanagan's compensation from the first improper trade until his resignation, damages from losses it says it suffered due to the investigation, and any other damages the courts deem proper, Reuters reported.
According to Courthouse News Service, Deloitte said, "Compounding his wrongdoing, Flanagan repeatedly lied to Deloitte about his clandestine trading activities in annual written certifications, going to far as to conceal the existence of a number of his brokerage accounts to avoid detection of his improper conduct." The court papers, filed in Chancery Court in Wilmington, DE, say Deloitte does not know the extent of the alleged inside trading or how much money Flanagan made.
Deloitte released a statement on the matter Friday, saying that it "unequivocally condemns the actions of this individual, which are unprecedented in our experience. His personal trading activities were in blatant violation of Deloitte's strict and clearly stated policies for investments by partners and other professional personnel. Further, it appears that he intentionally skirted our system for reporting and tracking investments."
You can read the full complaint.
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