Ernst & Young Pays $9 Million for Inappropriate Client Relations

  • SEC says former audit partners compromised independence
  • One partner had an undisclosed romantic client relationship

Ernst & Young agreed to pay $9.3 million to settle claims by the U.S. Securities and Exchange Commission that two former partners in the audit division had personal relationships with clients, violating rules to keep those Ernst & Young employees objective and impartial.

One of the partners, Pamela Hartford, maintained a romantic relationship with Robert Brehl, the ex-chief accountant of Ventas Inc., when the company was being audited, according to the order from the regulator Monday. In a separate case, Greg Bednar, another former partner, became too close to another client, traveling with that company’s chief financial officer and family to sporting events including professional football games, hockey matches and the Masters golf tournament, the SEC said.

“Ernst & Young did not do enough to detect or prevent these partners from getting too close to their clients and compromising their roles as independent auditors,” Andrew Ceresney, head of SEC enforcement, said in the statement.

The settlement represents the first time the SEC has sued an auditor over failing to maintain independence because of personal relationships. Ernst & Young didn’t admit or deny the findings.

“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,” Amy Call Well, an Ernst & Young spokeswoman, said in an e-mailed statement. “All have been separated from our organization. We regret these matters arose and are pleased to put them behind us.”

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