Thomas Flanagan, former partner at Deloitte in Chicago, pled guilty to engaging in insider trading after he obtained material, non-public information about publicly traded clients and used the information himself and shared it with a relative to make illegal trading profits.
Flanagan, 64, of Chicago, pleaded guilty to one count of securities fraud. Flanagan was represented by Joel Levin, a partner at Perkins Coie in Chicago. Flanagan admitted that he received illegal profits totaling approximately $420,000, and his relative, who was not charged, received at least $58,000 in illegal profits.
The profits resulted from illegally trading on the inside information that Flanagan obtained regarding Deloitte clients Best Buy Co. Inc., Walgreen Co., Motorola Inc. and Sears Holding Corp.
In 2010, Flanagan paid slightly more than a $1 million to settle a SEC civil enforcement action.
The settlement amount included $493,884 in disgorged profits, an equal amount in civil penalties and pre-judgment interest.
Flanagan was the advisory partner on Deloitte’s engagements with Best Buy, Walgreens and Sears, and in that capacity served as a liaison between the client’s audit management team and Deloitte’s audit engagement team.
He also served on Deloitte’s non-audit engagement team with Motorola.
Flanagan learned material, non-public information about these clients, including quarterly earnings results and possible acquisition targets.
Flanagan admitted that he illegally bought and sold securities using accounts that he owned or controlled, including accounts in his name and jointly with his wife, two of his sons, and a trust account for which he served as trustee.
He also admitted tipping a relative, so that relative could benefit from trading on the inside information that Flanagan received.
The plea agreement details a series of illegal trades that Flanagan made, and tipped his relative to make, based on his advance knowledge of: a fourth quarter earnings report that was weaker than analysts had predicted for Walgreens in 2007, a sales decline for Motorola during the fourth quarter of 2007, Walgreens’s agreement in 2007 to purchase Option Care Inc., and Sears’s 2008 first quarter earnings report that was weaker than analysts had predicted.
Flanagan also made, and tipped his relative to make, illegal trades involving Best Buy related to two quarterly earnings reports in 2007 and 2008, as well as its early 2008 forecast of reduced earnings lower revenue growth.