Former Deloitte & Touche LLP partner and vice chairman Thomas P. Flanagan pleaded guilty Wednesday to one count of criminal securities fraud for insider trading after obtaining nonpublic information about several Deloitte clients and agreed to pay over $1 million in penalties and disgorgement.

Flanagan, 64, of Chicago, used the information for himself, and shared it with his son Patrick, to make illegal trading profits. The U.S. Attorney’s Office for the Northern District of Illinois filed criminal charges against Flanagan last month in the U.S. District Court for the Northern District of Illinois. Sentencing is scheduled for October 25.

The SEC filed a civil action against Thomas and Patrick Flanagan in August 2010. Thomas Flanagan, a CPA, worked at Deloitte for 38 years and rose to the level of vice chairman of clients and markets. He allegedly traded in the securities of multiple Deloitte clients on nine occasions between 2005 and 2008, as well as a company acquired by a Deloitte client, while he was in possession of nonpublic information learned through his duties as a Deloitte partner. The information had not yet been disclosed to the public and concerned material, market-moving events such as earnings results, earnings guidance and acquisitions.

Thomas Flanagan’s illegal trading resulted in profits of over $430,000. On four occasions, Thomas Flanagan relayed the nonpublic information to his son Patrick, who then traded based on that information. Patrick Flanagan realized profits of more than $57,000.

Without admitting or denying the SEC’s allegations in the complaint and the findings in the administrative order, Thomas Flanagan consented to the entry of an order of permanent injunction, to pay disgorgement with prejudgment interest and civil penalties totaling $1,051,042, and to a denial of the privilege of appearing or practicing before the SEC as an accountant.

Similarly, without admitting or denying the SEC’s allegations in the complaint, his son Patrick Flanagan consented to the entry of an order of permanent injunction and to pay disgorgement with prejudgment interest and a civil penalty totaling $123,270.

The SEC also instituted related administrative and cease-and-desist proceedings on Aug. 4, 2010, finding that Flanagan violated the SEC’s auditor independence rules on 71 occasions between 2003 and 2008 by trading in the securities of nine Deloitte audit clients. The SEC’s settled administrative order found that during the time Flanagan owned or controlled these securities, Deloitte issued audit reports to the nine audit clients in which it stated that the financial statements contained in the reports had been audited by an independent auditor.

However, due to Flanagan’s ownership of the audit clients’ securities, Deloitte was not independent. The companies then filed with the SEC annual reports and proxy statements which included the false audit reports. As a result, the SEC’s administrative order found that Flanagan caused and willfully aided and abetted Deloitte’s violations of the SEC’s auditor independence rules under Regulation S-X and also caused and willfully aided and abetted the companies’ violations of the reporting and proxy provisions of the Securities Exchange Act of 1934.

Thomas Flanagan concealed his trades in the securities of Deloitte’s clients and circumvented Deloitte’s independence controls, the SEC alleged in its complaint. He allegedly also failed to report the prohibited trades to Deloitte, lied to Deloitte about his compliance with its independence policies, and provided false information to Deloitte’s personal income tax preparers about the identity of the companies whose securities he traded. He and his son were charged with violations of the securities laws.

Deloitte itself sued the elder Flanagan in 2008 and won a summary judgment against him earlier in 2010 (see Deloitte Prevails in Lawsuit Against Ex-Vice Chair).

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