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Let’s Go Over this Independence Thing One More Time

To be fair, Thomas Flanagan — having been a partner at Deloitte for 30 years — probably didn’t remember the day that his auditing professor covered independence. If you figure that Tom was in college in the late 1960s, it’s surprising that he remembers anything.

Also, as the vice chairman of the firm, his job was to remind people of their duty to remain independent of the firm’s audit clients. He didn’t actually have to be independent himself. What good is insider information if you’re not going to use it, amiright?

Deloitte had sued Flanagan in Delaware Chancery Court in October 2008 for breach of fiduciary duty, fraud, and breach of contract, saying the 30-year partner who had risen to vice chairman of the firm had secretly hidden trades in shares of Deloitte’s audit clients and lied about it to the firm.

“Because an auditor sells, at base, its independence and integrity, the firm relies heavily on the purported honesty and independence of its professionals,” Vice Chancellor John Noble, of the Delaware Court of Chancery, wrote in his opinion.
Deloitte said in its complaint that starting as early as 2005, Flanagan had made more than 300 trades in shares of Deloitte’s audit clients, including several clients for which he was Deloitte’s advisory partner.

Meanwhile, Flanagan specifically told the firm he was not trading in client stocks, which are restricted under the firm’s independence policies, according to the complaint.

Tom must have been a choir boy prior to getting the Vice Chair gig. How else could he have gotten to be such a bigwig if he wasn’t a poster child for integrity? Was he that good of a liar?

Never mind that for a sec. What’s really curious is why the hell a Vice Chairman needed the extra scratch. A comic book collection that would rival Nic Cage’s? Financing a business opportunity? A spendy wife/mistress/pool boy? If you’ve got any thoughts, discuss below and if this story doesn’t clear things up on independence, start crack the auditing textbooks.

Deloitte wins insider trading suit vs. ex-executive [Reuters]

Former Deloitte Employee and Burgeoning Adult-themed Mobile App Entrepreneur Annabel McClellan Appears in Court, Sans Husband

Hard to believe it’s almost been two weeks since we mentioned alleged insider trader/justice obstructer/swinger app developer Annabel McClellan but time sure flies when you’re facing criminal charges, amiright?

Annabel made an appearance in criminal court yesterday but sadly, her husband and alleged insider trading conspirator, Arnold, was nowhere to be seen. You could probably conclude that someone has to watch the kids, since no one in Pacific Heights is interested in being associated with the couple at this point.


From the Bay Citizen:

[O]n Tuesday, Annabel McClellan was very much alone in court. Previously, she surrendered her British passport and posted $250,000 bail. If convicted of the obstruction of justice charge, she could face five years in prison. Potential damages in the SEC case could exceed $90 million.

Nanci Clarence, Annabel McClellan’s attorney, told U.S. District Court Judge William Alsup that she would need several months to adequately review the documents that U.S. federal prosecutors have handed over. As of Tuesday, the number of documents stood at 47,000.

While it’s pretty unlikely that My Nookie, the aforementioned mobil app that appears to be a Wheel of Position Fortunes, gets much attention in the documents, we can always hope. The fact that this will keep the McClellans tied up in court for months and maybe years to come, goes without saying but Ms. McClellan’s attorney – acting in her client’s best interest – opted to go there:

“This is a fairly complicated matter,” Clarence explained to Judge Alsup, who will also be presiding over the related SEC case against both McClellans. Additionally, Clarence said, there are “very extensive parallel proceedings in the United Kingdom. That proceeding [will] generate its own extensive discovery” of evidence. Assistant U.S. Attorney Adam Reeves, who is prosecuting the case, did not object to the delay.

As everyone agreed on April 5 as the next court date in the case, Alsup addressed McClellan, dressed all in black, who had stood quietly before him for the duration of the hearing, saying, “Ms. McClellan, welcome to the court. See you back in April.”

*Photo: Drew Altizer Photography via The Bay Citizen

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