Did Deloitte Compromise Independence in McClellan Insider Trading Scandal?

15 january 2013

There are plenty of sexy externalities associated with the latest insider trading charges against a former Deloitte tax partner and his wife. Spicing things up: A May-December marriage, a XXX-rated website, and lots of trips between San Francisco and London to “vacation.”

Who woulda thunk it’s the tax partners having all the fun?

The McClellan case – their UK relatives were arrested in May 2009 and formally charged by the FSA last month – and another one against former Deloitte Vice Chairman Thomas Flanagan, settled this past August, were on the SEC’s desk at the same time. Deloitte has not been charged by the SEC in either. I doubt they will be. Deloitte played the “We were duped” card with the SEC and their clients. They sued Flanagan to save face with both.

Humble cooperation absolves all compliance sins, I suppose.

Arnold McClellan, the latest partner accused of trading on inside information, left Deloitte this past June. His expertise was tax strategy for mergers & acquisitions. The acquiring companies cited in the SEC’s complaint, Hellman & Friedman (H&F) and McKesson, are Deloitte clients.  McKesson is a Deloitte audit client. I’m making an educated guess that H&F is, too.

Private equity firms are private by nature and often private in the legal sense, too. As a result, it’s difficult to determine which professional services vendors serve them since there are no SEC filings or other public disclosures until they issue public debt, IPO, or otherwise disclose these facts.