Ernst & Younger LLP can pay $10 million to settle a regulatory investigation into allegations that it improperly obtained confidential info in pursuit of a contract to audit a public firm’s books.
The Securities and Change Fee additionally fined 4 accountants allegedly concerned within the misconduct: an Ernst & Younger accomplice, two retired companions and a former chief accounting officer of the unnamed consumer firm who shared the aggressive info with them, in keeping with the company. The 4 accountants had been all suspended from reviewing the monetary statements of public firms for intervals starting from one to a few years.
Ernst & Younger and the 4 accountants agreed to settle the SEC’s claims with out admitting or denying misconduct.
The SEC’s settlement order didn’t title the audit consumer. However William G. Stiehl, the previous chief accounting officer, labored in that position for Sealed Air Corp. SEE -0.78% till he was terminated in June 2019, in keeping with a regulatory submitting made by the corporate. The Wall Road Journal reported in February 2020 that the SEC and federal prosecutors had been probing considerations that Mr. Stiehl rigged the competitors to assist Ernst & Younger win Sealed Air’s multimillion-dollar audit contract.
The SEC’s investigation described frequent contacts between Mr. Stiehl and the audit companions. Late within the bidding course of, when Ernst & Younger was a finalist for the work together with one other accounting agency, Mr. Stiehl attended an NFL recreation in Ernst & Younger’s suite in Charlotte, N.C., in keeping with the SEC.
“Auditor independence shouldn’t be merely an impediment to beat, it’s the bedrock basis that helps the integrity, transparency, and reliability of monetary reporting,” SEC official Charles Cain mentioned in an announcement. “EY and its companions overlooked this basic precept of their pursuit of a brand new consumer.” Attorneys for Ernst & Younger and the 4 accountants declined to remark. A spokesman for Sealed Air didn’t instantly reply to a request for remark.
Ernst & Younger mentioned in an announcement that the allegations date from a bid that occurred in 2014. The Huge 4 accounting agency mentioned it’s “dedicated to competing pretty for brand spanking new enterprise and on the premise of our {qualifications} and deserves.”
Mr. Stiehl, 59 years outdated, was beforehand a senior govt at Carlisle Cos., which additionally used Ernst & Younger as its auditor, the Journal reported final 12 months. In that earlier company position in addition to one different, he had “labored intently” with James Herring, one of many Ernst & Younger companions, and got here to view him as a “belief advisor,” the SEC mentioned in a settlement order.
When Mr. Stiehl joined Sealed Air in 2013, he started offering Mr. Herring with confidential details about Sealed Air’s efforts to have interaction a brand new audit agency, the SEC’s order mentioned. Mr. Stiehl allowed Ernst & Younger to assist draft parts of his firm’s request for proposal earlier than it was launched, in keeping with the SEC.
He additionally gave Ernst & Younger the proposals of different accounting companies competing for the work, in addition to inside paperwork ready for Sealed Air’s audit committee, typically earlier than the committee members obtained them, the SEC mentioned.
In late 2014, after Sealed Air chosen Ernst & Younger for the work, Mr. Stiehl despatched an e-mail to a different Ernst & Younger accomplice—a former faculty roommate—that learn: “Again within the household!!!”
Ernst & Younger companions characterised the choice as a “$10 million a 12 months annuity which can span throughout a number of companies traces,” the SEC’s order mentioned. The Journal reported final 12 months that KPMG LLP additionally bid for the Sealed Air audit work.
Mr. Herring, 47, nonetheless works at Ernst & Younger, in keeping with the SEC and the accounting agency. He agreed to pay $50,000 to settle the SEC’s allegations and agreed to a three-year suspension from auditing public firms.
Mr. Herring shared the data he acquired from Mr. Stiehl with two different Ernst & Younger companions, James A. Younger and Curt W. Fochtmann.
Mr. Younger, who retired final 12 months, is listed in regulatory information because the accomplice who was accountable for Sealed Air’s audit from 2016 by way of 2018.
Mr. Younger agreed to pay a $25,000 positive and serve a two-year suspension, the SEC mentioned. Mr. Fochtmann, 61, agreed to pay $15,000 and was suspended for at the least one 12 months, the SEC mentioned. He additionally retired from Ernst & Younger final 12 months, in keeping with the regulator.
Sealed Air disclosed earlier this 12 months that the U.S. lawyer’s workplace for the Western District of North Carolina had closed its investigation and wouldn’t take motion in opposition to the corporate.
