(Adds details, background, comment from SEC enforcement
official, company spokesman)
By Sarah N. Lynch
WASHINGTON, July 14 Accounting firm Ernst &
Young will pay $4 million to settle civil charges that
it violated auditor independence rules when one of its units
lobbied congressional staff on behalf of its audit clients, U.S.
regulators said Monday.
The Securities and Exchange Commission said the firm is
settling the case without admitting or denying the charges.
A spokesman for Ernst & Young said on Monday that the firm is
happy to put the matter behind it and that auditor independence
is "of paramount importance."
"We regret these instances that arose many years ago," said
John La Place. "In 2012, Ernst & Young voluntarily decided to
cease performing lobbying work for SEC registrant audit
SEC rules prohibit auditors from serving as "advocates" for
audit clients because doing so may cloud their independence when
they review companies' financial statements.
The auditor independence rules were beefed up more than a
decade ago after the Enron-era accounting scandals.
"Auditor independence is critical to the integrity of the
financial reporting process," said Scott Friestad, an associate
director in the SEC's enforcement division.
"Ernst & Young engaged in lobbying activities that
constituted improper advocacy and clearly violated the rules,"
The SEC's case comes after Reuters exclusively reported in
2012 that Ernst & Young's Washington, D.C.-based lobbying arm
had been hired by several audit clients.
In that report, Reuters found that Ernst & Young's lobbying
arm, known as Washington Council Ernst & Young, had ongoing
lobbying contracts with companies it also audited.
Those companies included Amgen Inc, CVS Caremark
and Verizon Communications Inc.
In addition, Reuters found that the unit previously had
lobbying contracts with other companies including AT&T,
Fortress Investment Group LLC and Transocean Ltd
which ended between 2006 and 2011.
Shortly after Reuters reported the story, Ernst & Young's
lobbying unit severed its business relationship with the
companies that still had outstanding contracts.
The SEC's case focuses on lobbying services provided to two
audit clients but does not name the companies.
The agency said that prior to 2009, the firm sent letters to
congressional staff on behalf of one of the companies, urging
passage of a bill crucial to the company.
For the other company, the SEC said, Washington Council
Ernst & Young sought to persuade members of Congress to withdraw
their support for a bill that hurt the client's interests.
(Reporting by Sarah N. Lynch; Additional reporting by Dena
Aubin and David Ingram; Editing by Susan Heavey)