Accounting & Tax

Deloitte Partners Charged by SEC

Regulator charges that partners contributed to Adelphia’s securities-law violations.
Stephen TaubSeptember 30, 2005

The Securities and Exchange Commission instituted administrative proceedings against two former partners of Deloitte & Touche for the role they allegedly played in the accounting fraud scandal at Adelphia Communications.

The regulator accused Gregory M. Dearlove and William E. Caswell of engaging in improper professional conduct. According to the SEC’s order, the violations were related to the audit of Adelphia’s financial statements for the year ended December 31, 2000.

The order stated that “Dearlove knew, or should have known,” that his failure to plan, conduct, and supervise an audit that conformed to generally accepted auditing standards — and his approval and signature on an unqualified audit report — would contribute to Adelphia’s violations. Adelphia’s infractions included filing a misleading 2000 Form 10-K, maintaining an inadequate system of internal accounting controls, and failing to have its books and records conform to generally accepted accounting principles.

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Caswell, who was the most senior nonpartner on Deloitte’s Adelphia engagement, agreed to settle the charges without admitting or denying the SEC’s findings. In April Deloitte agreed to pay $50 million to settle the SEC’s charges related to its audit of Adelphia.

Deloitte served as the independent auditor for Adelphia from at least 1986, the year when Adelphia’s securities became publicly traded, until May 14, 2002. At that point, says the SEC, Deloitte suspended its work on the audit for the year ended December 31, 2001, citing that Adelphia’s books and records had been falsified.