Deloitte won a lawsuit against a former partner and vice chairman accused of profiting from insider trading on clients stocks and violating the firms conflict-of-interest rules.
Delaware Judge John Noble ruled against Thomas Flanagan on Dec. 29 in a summary judgment. Deloitte sued Flanagan in October 2008, accusing its Chicago-based partner of trading in stocks and options of audit and advisory clients and other restricted entities over 300 times between 2001 and 2008 (see Deloitte Sues Ex-Vice Chair for Insider Trading).
The judge cited one incident in which Flanagan went to a 2006 meeting of Allstates audit committee in which the insurer circulated a draft of its second-quarter earnings, which included a significant increase in its full-year guidance. The following day he bought call options in Allstate and then sold them the day after Allstate publicly announced its earnings, according to the Chicago Tribune. In another incident, he bought stock in Option Care after hearing that his advisory client Walgreen intended to acquire the company.
Flanagan allegedly attempted to cover up his activities by first entering his holdings in the firms computer-tracking system and later making a correcting entry or indicating he had disposed of the stocks or options. During the trial, Flanagan pleaded the Fifth Amendment against self-incrimination when asked to explain his activities.
However, his attorneys claimed that the trades were permitted by the SEC or were in companies that were not his clients or his offices clients. They also argued that Deloittes independence rules were unclear.
Deloitte is asking for monetary damages from Flanagan, which may include giving up his retirement benefits.
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