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By Suzanne Barlyn
Sept 19 Accounting firm Ernst & Young will pay
$9.3 million to settle charges that two of its former auditors
got "too close to clients on a personal level" and broke rules
aimed at ensuring reviews were impartial, the U.S. Securities
and Exchange Commission said on Monday.
Three former Ernst & Young partners and a client's former
chief accounting officer also settled SEC charges, agreeing to
various penalties and suspensions, the agency said.
SEC investigations found that Gregory Bednar, a former
senior partner on the audit team for a New York-based public
company, had "maintained an improperly close friendship" with
its chief financial officer, the agency said in a statement.
Pamela Hartford, a second former partner on another audit
team, had been "romantically involved" with Robert Brehl, a
different client's chief accounting officer, the SEC said.
A third former partner, Michael Kamienski, knew of facts
that should have caused him to inquire about a possible romantic
relationship between Hartford and Brehl, but did nothing, the
Lawyers for the individuals were not immediately available
The cases mark the SEC's first enforcement actions against
auditors who failed to remain independent due to "close personal
relationships" with clients' employees, the agency said. It said
that in both situations, Ernst & Young ignored red flags that
signaled conduct their partners' inappropriate conduct.
Auditors are independent, outside accountants who examine a
public company's financial statements and certify their
accuracy. The process, required by the SEC, is designed to give
investors additional assurances, beyond the company itself, that
they can rely on the statements.
"Independent auditors serve as critically important
gatekeepers," said SEC enforcement chief Andrew Ceresney in a
call with reporters on Monday.
Neither Ernst & Young, nor the individuals charged, admitted
or denied the SEC's charges, the agency said.
Those involved in the misconduct have been "separated" from
Ernst & Young, company spokeswoman Amy Call Well said in a
"The individuals at the center of these matters violated
multiple EY policies, hid their conduct and behaved in a way
that was antithetical to EY's Global Code of Conduct, culture,
values, policies, and training," the statement said. "The
decisions they made betrayed the trust placed in them."
(Reporting by Suzanne Barlyn in New York, Additional reporting
by Susan Heavey in Washington; Editing by Meredith Mazzilli and
Lisa Von Ahn)