The former chief risk officer for Deloitte & Touche pushed the limits of his risk management in a casino that was an accounting client and has been charged by the Securities and Exchange Commission and suspended for at least two years.
Taking markers from casino client impaired auditor’s objectivity
The SEC charged that James Adams accepted payments that impaired the auditor’s objectivity and impartiality, according to the complaint. The SEC accuses Adams with “repeatedly accepted tens of thousands of dollars in casino markers while he was the advisory partner on subsidiary Deloitte & Touche’s audit of a casino gaming corporation.” A “marker” is an instrument used by casinos that enables people to borrow from the casino and obtain chips to gamble.
Conceals receipt of markers from Deloitte
Adams is accused of concealing receipt of the markers from Deloitte & Touche and lying to a partner when asked if he had casino markers from audit clients of the firm. The SEC complaint alleges that between July 2009 and December 2009 he drew markers for various amounts ranging from as little as $3,000 to as much as $110,000. His last marker, drawn on December 16, 2009 for $110,000 remains outstanding.
“The transactions by which Adams accepted the casino markers were loans from an audit client that are prohibited by the auditor independence rules,” said Scott W. Friestad, associate director in the SEC’s Division of Enforcement. “Auditor independence is critical to the integrity of the financial reporting process. Through his extensive use of casino markers, Adams clearly violated the rules and put his own desires ahead of his client’s interests.”
Adams agrees to settle with SEC, suspended for two years
California resident Adams agreed to settle the SEC’s charges by being suspended for at least two years from practicing as an accountant on behalf of any publicly traded company or other entity regulated by the SEC.
Could the casino be in trouble?
Adams might not be the only one who is in trouble, but the unnamed Casino might be in the line of fire as well. “On March 9, 2010, Casino Gaming Issuer filed its annual Report on Form 10-K for its fiscal year ended December 31, 2009. The annual report included a D&T audit report that stated that its audit of the financial statements of Casino Gaming Issuer had been conducted in accordance with the standards of the PCAOB. Because of Adams’ conduct described above, that statement was incorrect,” the SEC complaint reads.