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April 27, 2005

A Quote too Good to Linger in Obscurity

Mark Schonfeld, director of the SEC's Northeast Region, has a future in any industry that rewards the creation of vivid metaphors. A correspondent writes that we should check out Deborah Solomon, "Moving the Market: Deloitte Statement About Adelphia Raises SEC's Ire," Wall Street Journal 4/27/05 p. c3:

As Deloitte & Touche LLP sought to resolve charges that it failed to detect accounting fraud at Adelphia Communications Corp., the auditor found itself back in hot water with securities regulators over its depiction of the role it played in the fraud. Deloitte agreed yesterday to pay $50 million to settle Securities and Exchange Commission charges that it missed fraud at the country's fifth-largest cable company. The payment is the largest ever levied by the SEC against an accounting firm. However, Deloitte found itself again in the SEC's cross hairs after issuing a public statement that appeared to shift blame to Adelphia by saying the company and some executives "deliberately misled" Deloitte's auditors.

Under terms of the settlement agreement, Deloitte is required to neither admit nor deny the SEC's charges. SEC officials viewed the statement as denying liability and forced Deloitte to rescind it.

"Deloitte's characterization of the case is simply wrong. Deloitte was not deceived," said Mark K. Schonfeld, director of the SEC's Northeast Region. "They didn't just miss red flags, they pulled the flag over their head and then claimed they couldn't see."

Posted by DeLong at April 27, 2005 08:38 PM