Former Chief Risk Officer At Deloitte Charged By SEC

Securities And Exchange Commission SECBy U.S. Government [Public domain], via Wikimedia Commons

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.



About the Author

Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com