UPDATE 1-SEC charges ex-Deloitte risk officer over independence violations

Tue May 20, 2014 4:52pm EDT

(Adds background on the case, details, no comment from Adams' attorney)

By Sarah N. Lynch

WASHINGTON May 20 (Reuters) - A former chief risk officer for accounting giant Deloitte & Touche agreed to settle civil charges on Tuesday alleging he violated rules governing auditor independence, U.S. securities regulators said.

James T. Adams agreed to be suspended for two years from practicing as an accountant for public companies, the Securities and Exchange Commission said.

He will also not be able to serve during the two-year period as an accountant for other SEC-regulated entities, such as broker-dealers and investment advisers.

The SEC said Adams ran afoul of rules designed to make sure auditors are objective and impartial after he accepted tens of thousands of dollars in "casino markers" at the same time he was serving as an adviser on the audit of a casino gaming corporation.

Casino markers are used by gambling customers to receive gaming chips drawn against their lines of credit at a casino.

Scott Schreiber, a partner at law firm Arnold & Porter representing Adams, declined to comment.

SEC rules generally require auditors to refrain from conduct that could impede their independence as objective watchdogs, such as owning the stock of a client company or offering non-audit services to an audit client.

In this case, the SEC said Adams opened a line of credit at a casino that was run by an audit client, and that he concealed his casino markers from Deloitte and another Deloitte partner.

"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 Friestad, an associate director in the SEC's enforcement division.

"Auditor independence is critical to the integrity of the financial reporting process," Friestad said. "Through his extensive use of casino markers, Adams clearly violated the rules and put his own desires ahead of his client's interests." (Reporting by Sarah N. Lynch; Additional reporting by Jonathan Stempel in New York; Editing by Eric Beech and Peter Cooney)