Securities regulators handed a virtual death sentence Wednesday to a former
accountant, permanently barring the PricewaterhouseCoopers partner from auditing the books of another public company.
Securities and Exchange Commission
said PwC partner Richard Scalzo had agreed to the lifetime public auditing ban without either admitting or denying the commission's finding that he had been "reckless" in overseeing some of Tyco's financial reviews.
Regulators contend the Scalzo ignored and failed to act on a number of obvious signs that Tyco's former management team, including former Chief Executive Dennis Kozlowski, was "looting" the company.
Kozlowski and another former top Tyco executive, Mark H. Swartz, are facing trial on a series of fraud charges.
"Scalzo is not being sanctioned because he did not discover the looting,'' said Thomas Newkirk, SEC associate director of enforcement, in a prepared statement. "He is being charged because he did not look despite these warnings.''
Despite the lifetime ban, the Big Four accounting firm said it stands by its man and insists all its work for Tyco was proper.
David Nestor, a PwC spokesman, said the firm "supports and respects'' Scalzo's decision to settle with the SEC but he will remain as a partner and they continue stand by the firm's work for Tyco.
The lifetime public auditing ban does not prevent Scalzo from continuing to do work for private companies or individuals.
"We can't control PwC,'' said SEC Assistant Director James Coffman, when asked in a telephone interview about the firm's decision to keep Scalzo on its staff. But he said the commission's investigation into the matter continues.
It's been a bad couple of days for PwC. Last Friday, the SEC entered into a settlement with another of its former audit partners, Warren Martin, which barred him from auditing the books of any public company for up to two years. The suspension stemmed from Martin's work with
, a software maker that restated its 1997 to 1999 earnings because it improperly reported its revenue figures.
Martin left the accounting firm about a year ago.
In Scalzo's case, the audits in question covered a period from 1997 through 2001. The SEC, in the settlement document, faulted Scalzo for never reassessing the "level of audit risk'' associated some of Tyco's questionable executive compensation plans and the company's "related party transactions.''
In a related move, Manhattan District Attorney Robert Morgenthau, whose office had been conducting its own investigation into Tyco's audit, said it was closing its investigation and that no criminal charges would be brought in that matter. In a prepared statement, Morgenthau said he approved of the action taken by the SEC against Scalzo, but added that the auditor's conduct "did not rise to the level of criminal behavior."