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Ex-Deloitte risk officer borrowed chips from casino audit client, SEC says

A former chief risk officer for Deloitte & Touche settled SEC civil charges alleging he accepted tens of thousands of dollars in “casino markers” while serving as an adviser on the audit of a casino gaming corporation.

The SEC said Tuesday that James T. Adams violated rules governing auditor independence designed to make sure auditors are objective and impartial

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

The SEC said Adams opened a line of credit with a casino run by the client and used the markers to draw on the credit.

Adams concealed his casino markers from Deloitte & Touche and lied to another partner when asked if he had casino markers from audit clients.

Adams agreed to a two-year suspension from practicing as an accountant for public companies. He’s also barred during the two-year period from acting as an accountant for other SEC-regulated entities.

He consented to the order without admitting or denying the SEC’s findings. 

“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 W. Friestad, associate director in the SEC’s Division of Enforcement.

In January, KPMG paid $8.2 million to settle auditor-independence allegations brought by the SEC. The SEC alleged that the firm provided non-audit assistance such as bookkeeping and corporate finance services to the affiliates of companies it was auditing from 2007 to 2011. KPMG didn’t admit or deny the charges.

Some KPMG personnel owned stock in companies or affiliates they serviced as auditors, further violating the auditor-independence rules, the SEC said.

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

The SEC issued a report in January about its auditor-independence rules, citing the KPMG case as an example.

The SEC’s May 20, 2014 release is here.


Julie DiMauro is the executive editor of FCPA Blog and can be reached here.

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