EY to pay $10m to settle SEC misconduct charges
Ernst & Young and three audit partners settled charges with the Securities and Exchange Commission (SEC) over claims of misconduct in their relationship with the chief accounting officer of a US company, it is widely reported.
The big four firm agreed to a $10m (£7.2m) settlement to close the case on charges of audit independence misconduct, according to the Financial Times.
The case revolves around EY’s bids to secure Sealed Air, an American bubble wrap maker with almost $5bn (£3.6bn) in revenue, as its auditing client.
The SEC found that EY, firm partner James Herring, and former partners James Young and Curt Fochtmann improperly interfered with Sealed Air’s choice of an external auditor by asking for, and receiving, confidential competitive information from William Stiehl, the then chief accounting officer of Sealed Air.
In 2014 the auditor received tips from Stiehl about Sealed Air’s request-for-proposal process for selecting a new accounting firm and, the SEC said, ultimately made £13m from the bubble wrap maker in 2015.
Stiehl arranged for Herring to meet EY at least one month before other firms were invited, the SEC said.
The exclusive access led Stiehl to add over $1m in global tax services to the company’s business proposal, the SEC said.
Each of the partners involved agreed to penalty charges and to temporary suspensions: Herring $50,000, Young $25,000, and Fochtmann $15,000.
The SEC also settled charges of $51,000 with Stiehl, who was fired from Sealed Air in 2019 in the fallout of the investigation.
As part of the settlement, none admitted wrongdoing and may reapply to work as auditors.
Big four auditors have previously had sanctions imposed on them by the SEC for allegedly violating auditor independence rules. PwC paid almost $8m in 2019 for compromising its independence on over a dozen audits.