This morning we linked to a Reuters story that revealed Ernst & Young doing quite a fancy dance with auditor independence rules. You see, there is an advisory group within the firm known as Washington Council Ernst & Young who "helps clients manage opportunities and risks associated with the legislative and regulatory process." That's a quite wordy version of, "lobbying." Here are the services they provide:
- Full service representation before the Congress and Executive branch
- Strategic legislative advice
- Legislative process, issue monitoring and reporting, and technical legislative analysis
- Coalition development and management
- Statutory and report language drafting
- Development of "position papers" and other background documents
- Drafting congressional testimony and regulatory comments
Naturally, this wouldn't be a problem if they were providing these services to non-audit clients, but Reuters reports that is exactly what has been going on:
Amgen Inc (AMGN.O), CVS Caremark Corp (CVS.N) and Verizon Communications Inc (VZ.N) have ongoing lobbying contracts with Washington Council Ernst & Young, an E&Y unit, while also using the audit firm to review the corporations' books, according to documents reviewed by Reuters. The same arrangement occurred in the past with E&Y, its lobbying unit and AT&T Inc (T.N), Fortress Investment Group LLC (FIG.N) and Transocean Ltd (RIG.N), records show. Those lobbying contracts ended between 2006 and 2011.
The firm does not solicit votes on legislation for E&Y audit clients, Perkins said. "We assist clients in monitoring public policy, analyzing legislation and educating Treasury officials, the IRS, legislators, other policy makers and their staffs about the potential consequences of legislation," Perkins said.
The Lobbying Disclosure Act says that making contact with government officials counts as lobbying, with some exceptions. It makes no exception for education. The tax code says that activity is not lobbying unless it has the purpose of influencing legislation.