James T. Adams, a partner at the accounting firm Deloitte & Touche, would not ordinarily have gotten in trouble for borrowing money at a casino where he liked to gamble.
In this case, Mr. Adams also happened to be a partner in Deloitte, the casino’s auditor, and was playing a major role in the audit at the same time he was borrowing — and evidently losing — tens of thousands of dollars.
That conflict of interest led the Securities and Exchange Commission to bar Mr. Adams, who also served as the chief risk officer for the Deloitte LLP subsidiary, from practicing as an accountant for at least two years.
“Auditor independence is critical to the integrity of the financial reporting process,” Scott W. Friestad, associate director in the commission’s enforcement division, said in a statement announcing the enforcement action on Tuesday. “Through his extensive use of casino markers, Adams clearly violated the rules and put his own desires ahead of his client’s interests.”
Auditors are expected to be independent third parties, and the S.E.C. has rules to enforce as much. The agency said that Mr. Adams’s gambling loan, which it said he later defaulted on, clearly violated those rules. Mr. Adams will not be forced to pay a monetary penalty as part of his disciplinary action. Through an assistant, Mr. Adams’s lawyer, Scott Schreiber, declined to comment.
Mr. Adams had taken out a line of credit with the casino in 2004, well before the S.E.C. said he began to audit the company. But the agency said he engaged in “improper professional conduct” by accepting “casino markers,” which are advances on loans made to borrowers by casinos where they wish to gamble, after Deloitte began its audit in 2009.
Mr. Adams also increased his borrowing ability from $100,000 to $110,000 after becoming involved in the casino’s audit.
The commission did not name the casino involved, but it said the company filed its 2009 annual report on March 9, 2010. Caesars Entertainment, a Deloitte client that bills itself as the “world’s most geographically diversified casino-entertainment company,” filed its 10-K that day. A Caesars spokesman did not immediately return a call seeking comment.
Deloitte removed Mr. Adams from the casino’s account at the beginning of 2010, “for reasons that were not based on his use of casino markers,” according to the S.E.C.’s order. In an interview, a spokesman for Deloitte, Jonathan Gandal, did not specify why Mr. Adams had been removed.
In an email, Mr. Gandal, said that Deloitte had cooperated fully with the S.E.C.
“This former partner’s conduct plainly violated Deloitte’s policies, and he lied to Deloitte to conceal his actions,” Mr. Gandal said. “Mr. Adams is no longer part of our organization, and we strongly condemn his conduct.”