BizLawCentral: Ernst and Young in SEC settlement

The figures by which BTF overstated its accounts is phenomenal: shareholders' equity by 1,800 million in 2001. In 2002, it understated nett losses by more than USD 90 million and by a similar amount in 2003.

BTF was charged with fraud when the SEC found that a range of "fees" that were not paid were included as revenue items. The company has suffered no penalty as a result of its actions.

But its auditors have not been so lucky: E&Y has agreed to pay USD8.5 million to settle SEC charges against five Chicago partners and one from New York. Three of those accused have since left the firm.

But those accused are, importantly, in management at the firm: Kenneth Peterson, the professional practice director, Mark Sever, Ernst & Young's national director of professional practice and Randy Fletchall who ran the Chicago office; Thomas Vogelsinger, area managing partner, John Kiss, Engagement Partner for two of the audits.

Sever and Kiss were banned from practising before the SEC for three years; Peterson and Carpenter were banned for two years; Vogelsinger for nine months and Fletchall was censured for "a single instance of highly unreasonable conduct."

The charges were settled without being admitted or denied.

Two former officers of BTF are waiting to see if the Court will approve their settlements. Former CFO John Dwyer will pay USD250,000 and be permanently banned from office in a public company; former Controller Theodore Noncek will banned from office in a public company for two years.

The company has been through insolvency proceedings twice since the problems were revealed.