Ernst & Young to Pay $4 Million Over SEC Lobbying ClaimsAlan Katz
Ernst & Young LLP agreed to pay $4.1 million to settle U.S. regulatory claims that it violated auditor-independence rules when its subsidiary lobbied congressional staff on behalf of two clients.
Washington Council EY, a subsidiary, was prohibited from lobbying on behalf of clients because Ernst & Young repeatedly said in audit reports that its reviews of the companies’ financial reports were independent, the Securities and Exchange Commission said today in a statement.
“Auditor independence is critical to the integrity of the financial reporting process,” Scott Friestad, associate director in the SEC’s enforcement division, said. “Ernst & Young engaged in lobbying activities that constituted improper advocacy and clearly violated the rules.”
Before 2009, the firm lobbied for one client at least three times and another at least twice, the SEC said. In a note to one of the clients, the Ernst & Young subsidiary said that it “helped to tamp down activity” on legislation that would have harmed the client’s business, according to the SEC’s administrative order.
Ernst & Young acquired Washington Council in 2000.
While Ernst & Young had a written policy that dealt with independence, it didn’t provide any formal, in-person training on that policy to staff, the SEC said. Ernst & Young has since put into place new guidance about lobbying, according to the agency.
“We regret these instances that arose many years ago and are pleased to put this matter behind us,” Ernst & Young said in an e-mailed statement. “In 2012, EY voluntarily decided to cease performing lobbying work for SEC registrant audit clients.”
Ernst & Young operates one of the largest tax-lobbying firms in Washington, which reported billing clients $11.9 million in 2013, according to Senate records.
Among companies audited by Ernst & Young that were also listed as lobbying clients of Washington Council EY on the Senate’s Lobbying Disclosure Act database are: AT&T Corp. from 2000 through 2006, Verizon Communications Inc. from 2002 to 2012 and Amgen Inc. in 2012.