In October 2008, auditing firm Deloitte filed a shocking lawsuit against Thomas P. Flanagan, its Vice Chairman of Clients and Markets, for allegedly trading on inside information he received from audits and lying about it for years. Deloitte's lawsuit against Flanagan, a 30-year partner in the firm, was filed in Chancery Court in Delaware and alleged that Flanagan betrayed his client's trust and violated company policy by trading in securities of audit clients, including some of his own accounts.
Nearly four years later, the DOJ's probe into Flanagan's conduct was resolved this week when Flanagan pleaded guilty to one count of securities fraud. The DOJ announced on August 8 that Flanagan pleaded guilty to insider trading that resulted in illegal profits totaling approximately $420,000 for himself and at least $58,000 for one of his relatives.
According to the DOJ, Flanagan remains free on his own recognizance while awaiting sentencing on Oct. 25, 2012 by U.S. District Judge Robert M. Dow, Jr. The government's written plea agreement anticipates that under the advisory United States Sentencing Guidelines, Flanagan's sentence may range from 37 to 46 months in prison, and states that the government will recommending a sentence on the low end of that range.
In August 2010, Flanagan settled the SEC's charges against him concerning the same conduct by agreeing to pay over $1 million -- including $493,884 in disgorged profits, an equal amount in civil penalties, and pre-judgment interest. The SEC alleged that as part of his scheme,
Flanagan concealed his trades in the securities of Deloitte's clients and circumvented Deloitte's independence controls. He 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.