EY US Vice Chair & General Counsel Ann Cook is saying goodbye to the firm after just two years in the role and ten total at EY, an exit that Financial Times ties to the Great Cheating Scandal of 2019. We too shall find some red string and put it all together in a moment.
FT:
Ann Cook will leave the firm on August 1, partners have been told.
Her resignation comes amid scrutiny of the actions of the general counsel’s office in 2019, when the US Securities and Exchange Commission was looking into allegations of widespread cheating on training exams, including ethics tests.
Cook was deputy general counsel for litigation and regulatory matters in 2019, before being promoted to general counsel in 2021.
Cook did not respond to messages seeking comment, and EY declined to give a reason for her resignation.
“We wish Ann well in the next chapter,” the firm said. “She has been a valuable member of the leadership team at EY, and we thank her for her many positive contributions over the years.”
As part of its punishment for widespread cheating on internal web-based learning and the open book ethics portion required in some jurisdictions for CPA licensure, EY was required by the SEC to “engage in extensive undertakings,” including retaining two separate independent consultants to help keep the SEC off their ass remediate deficiencies. One consultant was supposed to review the firm’s policies and procedures relating to ethics and integrity. The other was tasked with reviewing EY’s conduct regarding its disclosure failures, including whether any EY employees contributed to the firm’s failure to correct its misleading submission.
See, part of the reason why the SEC hit the firm with the biggest fine ever was because EY did not voluntarily offer up all the information it had on cheating to the SEC. This is from the SEC’s June 2022 press release:
EY further admits that during the Enforcement Division’s investigation of potential cheating at the firm, EY made a submission conveying to the Division that EY did not have current issues with cheating when, in fact, the firm had been informed of potential cheating on a CPA ethics exam. EY also admits that it did not correct its submission even after it launched an internal investigation into cheating on CPA ethics and other exams and confirmed there had been cheating, and even after its senior lawyers discussed the matter with members of the firm’s senior management. And as the Order finds, EY did not cooperate in the SEC’s investigation regarding its materially misleading submission.
So that’s why the independent review part of the SEC’s order is critical to the firm getting right with regulators. The independent reviews were supposed to be done by this past March but people familiar with the matter ratted to FT that it hadn’t been done and the SEC had granted them more time. When asked about the delay, EY told FT the firm “met every deadline required of us, with the agreement of the SEC staff, and extensions are not uncommon.”
Shortly after the SEC announced action against EY, resident SEC contrarian Hester Peirce (even her name is contrary to the “i before e” rule) wrote in detail her reasons why she disagreed with the action, particularly the independent review part. The independent review, which is not required to be shared publicly and probably won’t be unless some amazing person of the very few with access to it leaks it to the media, is in essence a mission to identify people who should be thrown under the bus:
Third, this settlement’s remedies also set a troubling precedent. To conduct an “Independent Review of EY’s Disclosure Failures,” the Order mandates that EY “designate a three-person committee of EY senior personnel” to retain an independent consultant (the “Remedial IC”). The Remedial IC, who will have full access to EY’s privileged information, will “conduct a review . . . of EY’s conduct relating to the Commission staff’s June 2019 Information Request, including whether any member of EY’s executive team, General Counsel’s Office, compliance staff, or other EY employees contributed to the firm’s failure to correct its misleading submission.” The Remedial IC’s report shall “mak[e] recommendations, as the Remedial IC deems appropriate, as to employment actions or other remedial steps.” While the three-person committee can object to the recommendations, ultimately, the Remedial IC has the final say. The upshot of this requirement is that the Remedial IC is vested with non-appealable authority to discipline or fire any EY personnel involved with responding the SEC’s June 19 request. This implicit directive to find attorneys and compliance personnel to blame for not complying with a non-existent obligation to correct the June 20 submission is particularly troubling.
So you see now why there may be trouble brewing in EY’s in-house lawyer house and why a smart lady like Ann Cook might want to get out of there.
