The real estate investment trust Ventas has dismissed Ernst & Young as its auditor after E&Y determined that it lacked independence because of an “inappropriate personal relationship” between an E&Y partner and Ventas’s former chief accounting officer and controller.
Ventas also announced Wednesday that, following the dismissal of E&Y as its auditing firm, the company’s audit committee has engaged KPMG as its independent public accounting firm.
Ventas said that E&Y had advised it that, “solely due to the inappropriate personal relationship, it determined that it was not independent of the Company during the periods in question. As a result of such determination, E&Y stated that it was obligated under applicable law and professional standards to withdraw (and it has withdrawn) its audit reports on the Company’s financial statements for the years ended December 31, 2012 and 2013, and its review of the Company’s results for the quarter ended March 31, 2014. E&Y’s decision to withdraw such audit reports and review was made exclusively due to the personal relationship in question, and not for any reason related to Ventas’s financial statements, its accounting practices, the integrity of Ventas’s controls or for any other reason.”
Ventas noted that the senior E&Y partner on the Ventas account, who signed the 2012 and 2013 audit reports, was not the individual involved in the inappropriate personal relationship.
Ernst & Young said it had fired the partner after learning about the relationship. "This partner’s actions were a flagrant violation of our firm’s Code of Conduct and professional standards,” said a statement from the firm forwarded by spokesman John La Place. “Upon our learning of this matter, the partner was promptly terminated.”
Ventas also announced the separation of Robert J. Brehl from his position as chief accounting officer and controller in relation to these matters. Ventas added that Brehl’s separation from the company was not due to any disagreement with the company regarding its financial reporting or accounting operations, policies or practices. Brehle had formerly been a senior manager at E&Y between 1985 and 1998.
Richard A. Schweinhart, executive vice president and CFO of Ventas, has assumed Brehl’s responsibilities and will serve as the company’s acting chief accounting officer. Schweinhart agreed to modify and defer his previously announced retirement plans to ensure completion of the re-audit work and a smooth transition to his successor.
As Ventas’s new independent public accounting firm, KPMG has been engaged to complete a re-audit and re-review of the periods in question.
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