Accountants are privy to all kinds of material non-public information, and sometimes they do things with it that they shouldn’t. Usually, however, this happens after they win the client, but not always, particularly if they’re the (allegedly) overly friendly folks at Ernst & Young.
Ernst & Young LLP will pay $10 million to settle a regulatory investigation into allegations that it improperly obtained confidential information in pursuit of a contract to audit a public company’s books…. The SEC’s investigation described frequent contacts between [Sealed Air Corp. chief accounting officer William] Stiehl and the audit partners. Late in the bidding process, when Ernst & Young was a finalist for the work along with another accounting firm, Mr. Stiehl attended an NFL game in Ernst & Young’s suite in Charlotte, N.C., according to the SEC….
When Mr. Stiehl joined Sealed Air in 2013, he began providing [EY partner James] Herring with confidential information about Sealed Air’s efforts to engage a new audit firm, the SEC’s order said. Mr. Stiehl allowed Ernst & Young to help draft portions of his company’s request for proposal before it was released, according to the SEC.
He also gave Ernst & Young the proposals of other accounting firms competing for the work, as well as internal documents prepared for Sealed Air’s audit committee, often before the committee members received them, the SEC said.
In late 2014, after Sealed Air selected Ernst & Young for the work, Mr. Stiehl sent an email to another Ernst & Young partner—a former college roommate—that read: “Back in the family!!!”
Ernst & Young to Pay $10 Million to Settle SEC Probe of Bid Violations [WSJ]
SEC Charges Ernst & Young, Three Audit Partners, and Former Public Company CAO with Audit Independence Misconduct [press release]
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