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SEC Targets Auditor Grant Thornton

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From Reuters

The U.S. Securities and Exchange Commission said Tuesday that it had brought an enforcement action against accounting firm Grant Thornton in connection with a 1998 audit of MCA Financial Corp., a bankrupt Michigan mortgage banking company.

The SEC accused Grant Thornton, which jointly audited MCA’s 1998 financial statements with another firm, of aiding and abetting in “MCA’s violations of the antifraud and reporting provisions of the federal securities laws.” Grant Thornton also has been caught up in the accounting scandal involving Parmalat.

The SEC said its administrative proceeding also was brought against the other firm, Doeren Mayhew & Co., as well as three individuals “for misconduct in connection with their audit of MCA Financial Corporation’s financial statements.”

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The SEC said MCA filed false and misleading statements and used them in connection with a public debentures offering. The statements used “related party transactions to inflate and mischaracterize its income, assets and equity,” the SEC said.

The SEC said the accountants that it had charged “knew that MCA failed to disclose several million dollars of material, related party transactions.”

Despite this knowledge, Grant Thornton and Doeren Mayhew jointly gave an unqualified opinion on MCA’s 1998 statements and consented to the inclusion of their report in MCA’s debenture offering materials, the SEC asserted.

A Grant Thornton spokesman could not be reached for comment.

Separately, Bank of America said Tuesday that an account a lawyer for a group of Parmalat creditors had said contained $7.7 billion of Parmalat funds never existed.

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