Court vacates SEC order suspending ex-Ernst & Young partnerReprints
A federal appeals court has vacated a Securities and Exchange Commission order that suspended a former Ernst & Young partner from the accounting profession for two years, stating he should have been allowed to have an accounting expert testify on his behalf during investigative proceedings.
In 2015, the Washington, D.C.-based Public Company Accounting Board sanctioned Mark Laccetti, suspending him from the accounting profession for two years and fining him $85,000, in connection with a 2004 Ernst & Young audit of Haifa, Israel-based Taro Pharmaceuticals Industries Ltd., according to court papers in Mark E. Laccetti v. Securities and Exchange Commission. The SEC affirmed the board’s decision.
Mr. Laccetti asked the appeals court to vacate the orders and sanctions against him on the basis the board had not permitted an Ernst & Young accounting specialist to testify on his behalf.
The board stated it denied Mr. Laccetti’s request because the expert was employed by New York-based Ernst & Young and “it apparently did not want Ernst & Young personnel to monitor the investigation.”
In vacating the SEC order, a three-judge appeals court panel said the board had acted unlawfully. An Ernst & Young attorney was already planning to attend Mr. Laccetti’s interview, so the board’s rationale “makes no sense here,” said the ruling.
In addition, “The Board’s rationale for excluding this particular accounting expert did not justify the Board’s blanket exclusion of an accounting expert who could assist Lacetti and his counsel during the interview,” the ruling said.
The “only reasonable remedy is for the Board, if it chooses and the law otherwise permits, to open a new disciplinary proceeding against Laccetti and, if it chooses, to re-interview, Laccetti, to do so without violating his right to counsel,” said the ruling.
“The right to counsel is guaranteed by the Board’s rules. Infringement of that right is a serious matter. We cannot sweep that violation under the rug in the manner advocated by the Board in this case,” said the panel in remanding the case to the SEC with directions to vacate the board’s underlying orders and sanctions.