Thomas Flanagan, a former vice chairman in the Chicago office of Deloitte LLP whose client list once included Warren Buffett, has pleaded guilty in federal court to insider trading charges tied to improper trades in stocks of large Chicago-based corporate clients whose audits he oversaw.
Mr. Flanagan, 64, of Chicago, pleaded guilty to one charge of securities fraud and admitted garnering profits totaling about $420,000 from trading in stocks of Deloitte clients including Deerfield-based Walgreen Co., Hoffman Estates-based Sears Holding Corp. and (at the time) Schaumburg-based Motorola Corp., according to the U.S. attorney's office in Chicago.
In 2010, Mr. Flanagan paid more than $1 million to settle a civil lawsuit brought by the Securities and Exchange Commission.
Mr. Flanagan, who worked for Deloitte for more than three decades and was a pillar of Chicago's business scene, was lead partner on Deloitte's engagements with Walgreen, Sears and Minneapolis-based Best Buy Co. Inc., according to the plea agreement. He also served on Deloitte's non-audit team for Motorola.
According to the plea agreement, Mr. Flanagan traded on advance knowledge of a weak fourth-quarter 2007 earnings result for Walgreen, as well as Walgreen's deal that year to buy Option Care Inc. He also traded on advance knowledge of weaker-than-expected sales for Motorola in the fourth quarter of 2007 and Sears' first-quarter 2008 earnings, which were worse than analysts predicted, according to the plea agreement.
Mr. Flanagan also tipped a relative, who traded on the information, obtaining at least $58,000 in profits, prosecutors said. That relative isn't being charged. The SEC previously identified that relative as Mr. Flanagan's son, Patrick.
Sentencing before U.S. District Judge Robert M. Dow Jr. is scheduled for Oct. 25. Conviction on securities fraud charges can mean up to 20 years in prison and up to $5 million in fines. The plea agreement between Mr. Flanagan and the government anticipates sentencing guidelines between 37 and 46 months in prison, and federal prosecutors will recommend a sentence at the low end of that range.
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