Deloitte & Touche LLP Tuesday agreed to pay $50 million to settle charges that it failed to detect a massive accounting fraud that sent Adelphia Communications Corp. into bankruptcy, AP reported.
The accounting firm was accused of engaging in improper professional conduct by failing to detect fraud when it reviewed the cable operator's books for fiscal-year 2000, according to AP.
D&T said it agreed to pay $25 million to settle a Securities and Exchange Commission administrative proceeding and $25 million to settle a suit filed in federal district court arguing that the accounting firm failed to implement procedures designed to detect illegal acts at Adelphia, AP reported.
The settlement, which will end charges filed by the SEC, is the largest yet to be levied on an auditing firm, according to AP.
The SEC said the money from the accounting firm will be deposited into a fund to compensate people who lost money when the MSO filed for Chapter 11 bankruptcy protection following revelations of widespread accounting improprieties.
“When auditors turn a blind eye toward misconduct on a high-risk client and allow a fraud of this magnitude to go undetected, the consequences will be severe,” SEC Northeast-regional-office director Mark Schonfeld said in a prepared statement.