On August 4, 2010, the SEC charged Thomas P. Flanagan, a former Deloitte & Touche LLP vice chairman and partner in the firm’s Chicago office, and his son, Patrick T. Flanagan, with insider trading in the securities of several of the firm’s audit clients. The SEC alleged that Thomas Flanagan had access to advance earnings results, earnings guidance, acquisition information and other nonpublic information from Deloitte’s audit engagements with Best Buy, Sears and Walgreens, as well as the firm’s consulting engagement with Motorola, and traded in the securities of such clients. According to the SEC, Thomas Flanagan committed insider trading nine times between 2005 and 2008 and tipped his son who then traded on the basis of the nonpublic information.
In addition to the complaint alleging insider trading, the SEC instituted administrative proceedings against Thomas Flanagan, finding that he violated the SEC’s auditor independence rules on 71 occasions between 2003 and 2008 by trading in the securities of Deloitte audit clients. The SEC’s settled administrative order finds that Thomas Flanagan caused and willfully aided and abetted Deloitte’s violations of the SEC’s auditor independence rules and Deloitte’s clients’ violations of the reporting and proxy provisions of the Exchange Act.
Thomas Flanagan consented to the entry of an order of permanent injunction, disgorgement with prejudgment interest of $557,158 and a penalty of $493,884, and Patrick Flanagan consented to the entry of an order of permanent injunction, disgorgement with prejudgment interest of $65,614 and a penalty of $57,656.