Deloitte Partner Thomas P. Planagan Busted For Insider Trading

Ex-Deloitte Partner Gets 21 Months for Insider Trades - Bloomberg Business
8/9/15, 5:16 PM
Ex-Deloitte Partner Gets 21 Months for

Insider Trades
Andrew M Harris
October 26, 2012 4:31 PM EDT
Updated on October 26, 2012 6:41 PM EDT
Oct. 26 (Bloomberg) -- Thomas P. Flanagan, a former Deloitte & Touche LLP partner, was given 21 months in
prison for trading on insider information about the accounting firms clients, including Best Buy Co. and
Walgreen Co.
Flanagan, who pleaded guilty to a single count of securities fraud in August, was also sentenced today to one
year of supervised release and fined $100,000 by U.S. District Judge Robert M. Dow in Chicago. Flanagan left
Deloitte in 2008, ending an association with the New York-based firm and its predecessors that lasted more than
three decades.
It was stupid, it was arrogant and it was wrong. It was so wrong, Flanagan -- who turned 65 today -- told Dow
before he was sentenced. The ex-certified public accountant said he deeply regretted what he had done.
Flanagan served as an advisory partner and liaison between the audit-management teams of Walgreen, Best Buy
and Sears Holdings Corp. and the firms auditors, according to the original charging papers filed in July.
His job gave him access to non-public information involving those companies and the technology firm formerly
known as Motorola Inc., including quarterly earnings results and potential acquisition targets, according to a
plea agreement he signed in August.
Used Accounts
From December 2006 to May 2008, Flanagan traded on the information to reap illegal profits of at least
$420,000 for himself, using accounts he owned or controlled including some in the names of family members,
according to the agreement. He also passed on information that allowed a relative to make $58,000, according
to the document.
http://www.bloomberg.com/news/articles/2012-10-26/exdeloitte-partner-gets-21-months-for-insider-trades-1
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8/9/15, 5:16 PM
Securities fraud carries a maximum punishment of 20 years in prison. Flanagans plea agreement called for a
term of three to four years in prison, and prosecutors sought at least 37 months.
Benches on one side of the courtroom gallery today were filled with members of Flanagans family -- including
his wife of 43 years, Betsy, and sons Patrick, 42, Michael, 40, and Brien, 37 -- as well as friends and neighbors.
Citing Flanagans plea and devotion to family and community, defense attorney Joel Levin asked Dow to
impose a sentence of six months incarceration and 1,000 hours of community service.
An Aberration
Mr. Flanagans insider trading represents an aberration from an otherwise exemplary life of devotion to family,
church, community and charitable endeavors, Levin said in an Oct. 19 brief. In the four years since he
resigned from Deloitte and while awaiting the outcome of the pending criminal investigation, he has done
everything within his power to make amends for his illegal conduct.
Levin today told Dow his client was a decent man who had already sustained the loss of his professional license
and paid $15 million to settle civil lawsuits filed against him by Deloitte and by the U.S. Securities and
Exchange Commission.
Acknowledging the courts need to impose a sentence that could deter others from committing similar crimes,
Levin said six months imprisonment wasnt an insignificant amount of time given his clients age and wouldnt
be out of line with other insider trading sentences.
Scarlet Letter
He specifically cited the two-year term imposed Oct. 24 upon Rajat Gupta, the former Goldman Sachs Group
Inc. director who leaked stock tips to Galleon Group LLC co-founder Raj Rajaratnam.
Unlike his client, Levin said, Gupta maintained his innocence and forced the government to prove his guilt at a
trial.
Theres no escaping what I did, Flanagan told the judge, calling his crime a scarlet letter.
Prosecutors said Flanagans personal history didnt outweigh the severity of his crime and argued for a
punishment that would promote deterrence.
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8/9/15, 5:16 PM
As in most insider-trading cases, it was not a crime of need or passion, the U.S. said in a filing. It was a
crime based on greed and an arrogant belief that defendant would not be caught.
Assistant U.S. Attorney Jason Yonan returned to that theme today in court, addressing the question of why
Flanagan would commit such an act.
Arrogant Belief
He had an arrogant belief that he would get away with it, Yonan said.
The prosecutor said Flanagan had committed a serious crime that feeds a public perception that the investment
world lacks what he called a level playing field, necessitating a punishment that will discourage others.
He needs to be held accountable, Yonan said. Fining a millionaire millions of dollars is not general
deterrence.
Dow agreed, noting that Flanagan didnt need the money generated by the unlawful options trading, which he
said was a tiny fraction of his net worth.
The only explanation I can come up with is hubris, the judge said.
Flanagan, his wife and his attorney each declined to comment after the proceeding.
Concealed Trades
Flanagan must report to prison on Jan. 15. His lawyer asked Dow to recommend to the federal Bureau of
Prisons that Flanagan be incarcerated at its minimum security facility in Yankton, South Dakota.
Deloitte unequivocally condemns Mr. Flanagans actions, Jonathan Gandal, a spokesman for the firm, said
today in an e-mailed statement, reiterating comments made after the ex-partner entered his guilty plea in
August.
Mr. Flanagan concealed from Deloitte his trades in the securities of our clients, lied about his compliance with
our independence policies and otherwise circumvented our system for reporting and tracking investments,
Gandal said.
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8/9/15, 5:16 PM
Flanagan and his son Patrick agreed in 2010 to pay more than $1.1 million to settle related insider-trading
claims brought by the U.S. Securities and Exchange Commission.
The case is U.S. v. Flanagan, 12-cr-00510, U.S. District Court, Northern District of Illinois (Chicago).
To contact the reporter on this story: Andrew Harris in Chicago at aharris16@bloomberg.net
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net
Page 4 of 4
FBI Former Deloitte Partner Pleads Guilty to Illegally Profiting $420,000 from Insider Trading Involving Firms Clients
8/9/15, 5:09 PM
Home Chicago Press Releases 2012 Former Deloitte Partner Pleads Guilty to Illegally Profiting $420,000 from Insider Trading Involving Firms Clients...
Former Deloitte Partner Pleads Guilty to Illegally

Profiting $420,000 from Insider Trading Involving
Firms Clients
U.S. Attorneys Office
August 08, 2012
Northern District of Illinois

(312) 353-5300
CHICAGOA former partner at a major accounting firm in Chicago pleaded guilty today to engaging in
insider trading after he obtained material, non-public information about publicly traded clients and used
the information himself and shared it with a relative to make illegal trading profits. The defendant,
Thomas P. Flanagan, a certified public accountant, was a partner in the Chicago Office of Deloitte &
Touche LLP when he engaged in insider trading between December 2006 and May 2008.
Flanagan, 64, of Chicago, pleaded guilty to one count of securities fraud, admitting that he received
illegal profits totaling approximately $420,000, and his relative, who was not charged, received at least
$58,000 in illegal profits. The profits resulted from illegally trading on the inside information that
Flanagan obtained regarding Deloitte clients Best Buy Co. Inc., Walgreen Co., Motorola Inc., and Sears
Holding Corp.
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Flanagan is free on his own recognizance while awaiting sentencing on October 25, 2012, by U.S. District
Judge Robert M. Dow, Jr. Securities fraud carries a maximum sentence of 20 years in prison and a $5
million fine. A written plea agreement anticipates an advisory United States Sentencing Guidelines
range of 37 to 46 months in prison, with the government recommending a sentence at the low end of the
guideline range. Flanagan was charged in a criminal information filed on July 11.
The guilty plea was announced by Gary S. Shapiro, Acting United States Attorney for the Northern
District of Illinois, and Robert D. Grant, Special Agent in Charge of the Chicago Office of the Federal
Bureau of Investigation. The U.S. Securities and Exchange Commission assisted in the investigation. In
2010, Flanagan paid slightly more than a $1 million to settle an SEC civil enforcement action. The
settlement amount included $493,884 in disgorged profits, an equal amount in civil penalties, and prejudgment interest.
According to the plea agreement, Flanagan was the advisory partner on Deloittes engagements with
Best Buy, Walgreens, and Sears, and, in that capacity, served as a liaison between the clients audit
management team and Deloittes audit engagement team. He also served on Deloittes non-audit
engagement team with Motorola. As a result, Flanagan learned material, non-public information about
these clients, including quarterly earnings results and possible acquisition targets. Flanagan knew that
he owed a fiduciary duty to Deloitte and its clients to maintain the confidentiality of the non-public
information and that he was prohibited from obtaining any financial interest in an audit client, as well as
disclosing or trading on the basis of inside information.
Flanagan admitted that he illegally bought and sold securities using accounts that he owned or
controlled, including accounts in his name and jointly with his wife, two of his sons, and a trust account
for which he served as trustee. He also admitted tipping a relative, identified as Individual A, so that
Individual A could benefit from trading on the inside information that Flanagan received.
The plea agreement details a series of illegal trades that Flanagan made, and tipped Individual A to
make, based on his advance knowledge of a fourth quarter earnings report that was weaker than analysts
had predicted for Walgreens in 2007; a sales decline for Motorola during the fourth quarter of 2007;
Walgreens agreement in 2007 to purchase Option Care Inc.; and Sears 2008 first quarter earnings
report that was weaker than analysts had predicted. Flanagan also made, and tipped Individual A to
make, illegal trades involving Best Buy related to two quarterly earnings reports in 2007 and 2008, as
well as its early 2008 forecast of reduced earnings lower revenue growth. The insider trading resulted in
illegal profits to the financial detriment of the persons or entities on the other side of the trading
transactions, the plea agreement states.
The government is being represented by Assistant U.S. Attorney Jason Yonan.
https://www.fbi.gov/chicago/press-releases/2012/former-deloitte-partner-pleads-g-to-illegally-profiting-420-000-from-insider-trading-involving-firm2019s-clients
Page 1 of 2
FBI Former Deloitte Partner Pleads Guilty to Illegally Profiting $420,000 from Insider Trading Involving Firms Clients
8/9/15, 5:09 PM
The announcement is part of efforts underway by the Financial Fraud Enforcement Task Force (FFETF),
which was created in November 2009 to wage an aggressive, coordinated, and proactive effort to
investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys
Offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and
regulatory agencies ever assembled to combat fraud. Since its formation, the task force has facilitated
increased investigation and prosecution of financial crimes; enhanced coordination and cooperation
among federal, state, and local authorities; addressed discrimination in the lending and financial
markets, and conducted outreach to the public, victims, financial institutions, and other organizations.
Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases
against nearly 15,000 defendants, including more than 2,700 mortgage fraud defendants. For more
information on the task force, visit www.stopfraud.gov.
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Page 2 of 2
SEC Charges Former Deloitte Partner and Son With Insider Trading; 2010-140; Aug. 4, 2010
8/9/15, 5:13 PM
Home | Previous Page
SEC Charges Former Deloitte Partner and Son With

Insider Trading
FOR IMMEDIATE RELEASE
2010-140
Washington, D.C., Aug. 4, 2010 The
Securities and Exchange Commission today
charged a former Deloitte and Touche LLP
partner and his son with insider trading in the
securities of several of the firm's audit clients.
High-Res Photo
Additional Materials
SEC Complaint Against Thomas Flanagan
and Patrick Flanagan
SEC Administrative Order Against Thomas
Flanagan
Litigation Release No. 21612
The SEC alleges that Thomas P. Flanagan of
Chicago traded in the securities of Deloitte
clients, often while serving as a liaison
between those companies' management
teams and Deloitte's audit engagement
teams. In this role, Flanagan had access to
advance earnings results and other nonpublic
information from Deloitte's audit
engagements with Best Buy, Sears, and
Walgreens as well as the firm's consulting
engagement with Motorola. Flanagan made
trades in the securities of these and other
companies while in possession of the
confidential information, and also tipped his
son Patrick T. Flanagan who then traded on
the basis of the nonpublic information.
Thomas Flanagan
repeatedly betrayed his
ethical responsibilities and
his clients' trust by trading
on confidential information
to enrich himself and his
family.
Merri Jo Gillette
Director
SEC Chicago Regional
Office
The Flanagans agreed to pay more than $1.1 million to settle the SEC's
charges.
"Flanagan's insider trading violated one of the most fundamental rules of
public accounting," said Robert Khuzami, Director of the SEC's Division of
Enforcement. "All audit firms should learn from this unfortunate episode and
employ vigorous controls designed to ensure compliance with the SEC's
auditor independence rules."
https://www.sec.gov/news/press/2010/2010-140.htm
Page 1 of 3
8/9/15, 5:13 PM
Merri Jo Gillette, Director of the SEC's Chicago Regional Office, said, "Thomas
Flanagan repeatedly betrayed his ethical responsibilities and his clients' trust
by trading on confidential information to enrich himself and his family."
According to the SEC's complaint, filed in the U.S. District Court in Chicago,
Thomas Flanagan worked at Deloitte for 38 years and rose to the position of
Vice Chairman of Clients and Markets. The SEC alleges that Flanagan
committed insider trading on nine occasions between 2005 and 2008 by
trading in the securities of multiple Deloitte clients and a company acquired
by Deloitte client Walgreens. Flanagan was in possession of nonpublic
information about those clients that he learned through his duties as a
Deloitte partner, including such material market-moving events as earnings
results, earnings guidance, and acquisitions. Flanagan's illegal trading
resulted in profits of more than $430,000. On four occasions, Flanagan
relayed the nonpublic information to his son, who traded based on that
information for illegal profits of more than $57,000.
In addition to the court-filed complaint alleging illegal insider trading, the SEC
also instituted administrative proceedings against Thomas Flanagan, finding
that he violated the SEC's auditor independence rules on 71 occasions
between 2003 and 2008 by trading in the securities of nine Deloitte audit
clients. Accountants are not independent if they own or control securities in
the clients that they audit. The SEC's settled administrative order finds that
while Thomas Flanagan owned or controlled client securities, Deloitte issued
audit reports to the clients stating that the financial statements contained in
the reports had been audited by an independent auditor. However, Deloitte
was not independent due to Flanagan's ownership and control of the audit
clients' securities. As a result, the SEC's administrative order finds that
Thomas Flanagan caused and willfully aided and abetted Deloitte's violations
of the SEC's auditor independence rules under Regulation S-X. Flanagan also
caused and willfully aided and abetted the clients' violations of the reporting
and proxy provisions of the Securities Exchange Act of 1934.
According to the SEC's complaint, Thomas Flanagan concealed his trades in
the securities of Deloitte's clients and circumvented Deloitte's independence
controls. He failed to report the prohibited trades to Deloitte, lied to Deloitte
about his compliance with its independence policies, and provided false
information to Deloitte's personal income tax preparers about the identity of
the companies whose securities he traded.
As a result of their conduct, the SEC's complaint charged Thomas and Patrick
Flanagan with violations of Sections 10(b) and 14(e) of the Exchange Act and
Rules 10b-5 and 14e-3. The SEC's administrative action found that Thomas
Flanagan caused and willfully aided and abetted Deloitte's violations of Rule
2-02(b)(1) of Regulation S-X, and caused and willfully aided and abetted the
clients' violations of Sections 13(a) and 14(a) of the Exchange Act, and Rules
13a-1, 13a-13, and 14a-3 thereunder.
Without admitting or denying the SEC's allegations in the complaint and the
findings in the administrative order, Thomas Flanagan consented to the entry
of an order of permanent injunction, disgorgement with prejudgment interest
of $557,158, a penalty of $493,884, and a denial of the privilege of appearing
or practicing before the SEC as an accountant. Without admitting or denying
the SEC's allegations in the complaint, Patrick Flanagan consented to the
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8/9/15, 5:13 PM
entry of an order of permanent injunction, disgorgement with prejudgment

interest of $65,614, and a penalty of $57,656.
James O'Keefe, Steven Klawans, and Kathryn Pyszka conducted the SEC's
investigation in this matter. The SEC acknowledges the assistance of FINRA
and the Options Regulatory Surveillance Authority in this investigation.
###
For more information about this enforcement action, contact:
Timothy L. Warren
Associate Regional Director, SEC Chicago Regional Office
(312) 353-7394
Steven L. Klawans
Assistant Regional Director, SEC Chicago Regional Office
(312) 886-1738
http://www.sec.gov/news/press/2010/2010-140.htm
Home | Previous Page
Modified: 08/04/2010
Page 3 of 3
Case: 1:12-cr-00510 Document #: 17 Filed: 08/08/12 Page 1 of 29 PageID #:45
UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
UNITED STATES OF AMERICA
vs.
THOMAS P. FLANAGAN
)
)
)
)
)
No. 12 CR 510
Judge Robert M. Dow, Jr.
GOVERNMENTS POSITION PAPER AS TO SENTENCING FACTORS

The UNITED STATES OF AMERICA, by its attorney, GARY S. SHAPIRO, Acting
United States Attorney for the Northern District of Illinois, hereby presents its sentencing
memorandum for defendant Thomas Flanagan.
I.
Introduction
Defendant Thomas Flanagan used his position as a partner at the accounting firm of
Deloitte & Touche to misappropriate material, nonpublic information belonging to Deloitte

clients for the purpose of conducting illegal insider trading. Defendants conduct occurred
over the course of at least a year and a half and allowed him to reap approximately $420,000
in profits. Defendants actions violated the fiduciary duty of trust and confidence he owed
to Deloitte and to its clients. Defendant not only used the material, nonpublic information
to purchase and sell securities himself, but also tipped some of the information to one of his
sons so that his son could also purchase and sell securities. This resulted in defendants son
obtaining approximately $50,000 in illegal profits, and in him being charged in a civil action
brought by the U.S. Securities and Exchange Commission. See Securities and Exchange
Commission v. Flanagan, 10 CV 04885 (N.D. Ill.).
At the time defendant began misappropriating material, nonpublic information

belonging to Deloitte clients, he was successful, highly educated, and had reached the
pinnacle of his professionachieving the status of a partner at a major public accounting firm.
He was compensated far more than most people would ever dream. He had, by all accounts,
a supportive and loving family. He was also active in civic and charitable endeavors. But
despite all of that, defendant repeatedly engaged in frauda fraud involving the
misappropriation of his clients secrets that goes to the very heart of the auditor-client
fiduciary relationship.
Insider trading cases, by their nature, are driven by arrogance and greed, and this case
is no exception. Fueled by access to material, nonpublic information and the desire to use
it for their benefit, defendants in insider trading cases cause significant harm to capital
markets and to individual investors on the other side of trades. A sentence of incarceration
is needed in this case to deter those with access to inside information from using it to illegally
trade. Simply put, defendant is the exact type of defendant and committed the exact type of
crime where general deterrence matters. If defendant is sentenced to a term of incarceration
at the low-end of the advisory Guidelines range in this case, the next individual
contemplating engaging in insider trading may think twice about going through with it. The
message this Court can send with a sentence of 37 months imprisonment is clear: if you
commit insider trading, particularly the type of insider trading in which you violate a
fiduciary duty of trust to your employer and its clients, you will lose more than your
profitsyou will lose your liberty.
2
II.
Application of 3553(a) Factors

A.
Legal Standards
The parties and the Probation Department agree that the properly calculated advisory
Sentencing Guidelines range is 37 to 46 months imprisonment. District courts must take the
Guidelines into account in calculating a defendants sentence. See Booker v. United States,
125 S.Ct. 738, 767 (2005). Although the Sentencing Guidelines are advisory only, [a]s a
matter of administration and to secure nationwide consistency, the Guidelines should be the
starting point and the initial benchmark. Gall v. United States, 552 U.S. 38, 49 (2007). The
Sentencing Guidelines are the sole factor in Section 3553(a) that provides any objective
sentencing range that can practicably promote the overall goal of minimizing unwarranted
sentencing disparities, which is itself a statutorily-mandated factor, Section 3553(a)(6). See
United States v. Mykytiuk, 415 F.3d 606, 608 (7th Cir. 2005) (The Guidelines remain an
essential tool in creating a fair and uniform sentencing regime across the country.).
The Court must also consider the factors set forth in Section 3553(a) in determining
a sentence that is sufficient, but not more than necessary, to achieve the goals of sentencing.
In particular, Section 3553(a) requires the Court to consider, among other factors: (1) the
nature and circumstances of the offense; (2) the history and characteristics of the defendant;
(3) the need to reflect the seriousness of the offense, to promote respect for the law, and to
afford adequate deterrence; (4) any pertinent policy statements issued by the Sentencing
Commission; and (5) the need to avoid unwarranted sentencing disparities among defendants
with similar records who have been found guilty of similar conduct. See 18 U.S.C.
3
3553(a).
These factors, taken together, weigh in favor of a sentence at the low-end of the
advisory Sentencing Guidelines range. In particular, the nature of defendants crime and the
need for general deterrence strongly favor such a sentence. Factors that defendant has raised
in his version of the offense, including his wifes health and the collateral consequences of
his actions, do not outweigh the other Section 3553(a) factors enough to justify the six month
sentence that defendant seeks.
B.
The Nature of Defendants Crime Weighs Strongly in Favor of a Sentence

at the Low-End of the Guidelines
Defendants conduct in this case weighs strongly in favor of a sentence at the low-end
of the advisory Sentencing Guidelines range for a number of reasons. First, defendants
misappropriation of inside information occurred over an extended period of time and
involved multiple different Deloitte clients. Defendant had access to material, nonpublic
information because he was a Deloitte partner assigned to Deloitte engagements with
Walgreens, Sears, Motorola, and Best Buy. In the course of his duties, defendant had regular
contact with employees of those companies and had access to information such as earnings
results and acquisition targets that Deloitte employees were privy to in order to conduct
audits for the companies or to provide consulting advice.
Much like an attorney, defendants regular access to this type of information came
with the responsibility that he keep it confidential and not use it for his own personal gain.
Information about a companys earnings results or acquisition targets is highly valued and
highly sought after in the market place. When publicly released, it often significantly affects
a companys stock price. Defendant was someone that both Deloitte and its clients thought
they could trust with this material, nonpublic information. That was not true. This renders
defendants conduct more serious because it involved calculated and repeated efforts to trade
on inside information and attacked the core of trust on which the audit-client relationship is
based.
Second, the nature and circumstances of defendants offense are aggravated because
defendants conduct implicated his family members. In particular, as noted above, defendant
tipped some of the material, nonpublic information he obtained to one of his sons in order
to allow his son to illegally profit from purchasing and selling securities. Though his son was
not charged with any criminal offense in this case, he was sued in a civil enforcement action
brought by the SEC.
Defendant also conducted much of his insider trading in accounts he controlled under
the names of other sons or under the name of his wifes family trust, for which he served as
the trustee. Such actions were designed to hide from Deloitte and regulatory agencies
defendants insider trading, but also served to cause individuals completely uninvolved in
the scheme to at least initially fall under an umbrella of suspicion, which this Court should
consider when evaluating defendants actions. There is no evidence that defendants sons
whose accounts he used or the beneficiaries of the trust had knowledge of defendants
actions, but he necessarily caused investigative resources to be focused on them by using
accounts in their names to conduct his illegal trading.
5
Third, defendant took other sophisticated steps to hide his insider trading from
individuals at Deloitte. For example, defendant submitted to Deloitte personnel who
prepared his personal federal and state income taxes false information regarding his trading
activities. While defendant accurately reported the gains on all transactions, he listed trades
in other companies in place of Walgreens, Best Buy, and Sears, so that he could hide that he
had interest in, and was trading based on inside information of, Deloitte clients in which he
was restricted from conducting any securities trading.
Finally, at the time defendant committed his crimes, he was a partner at one of the
largest accounting firms and misappropriated information he had access to from publiclytraded Fortune 500 companies. Thus, the victim in this case is not only the capital markets
themselves, but also includes Deloitte, who suffered the reputational damage of having a
partner breach his fiduciary duty to clients, and the clients themselves whose confidential
information was misappropriated. That makes this case much more than a garden-variety
insider trading case, and it should be reflected in defendants sentence.
C.
Defendants History and Characteristics Do Not Outweigh the Serious

Nature of the Crime at Issue
In his version of the offense, defendant focuses his argument for a sentence
substantially below the advisory Guidelines range on his community and charitable service,
issues regarding his wifes health, and the collateral consequences of his conviction.
Certainly the Court can consider all of these issues as mitigating factors in determining
defendants sentence. But these issues do not rise to the level in which they outweigh other
3553(a) factors or other of the defendants characteristics to justify the sentence defendant
seeks.
Defendant details his community and charitable service in his version of the offense.
While his acts are commendable, the Court should keep in mind that defendants wealth and
the very position of trust at Deloitte that he abused afforded him the opportunity to act so
generously. As the Seventh Circuit has stated:
Wealthy people make gifts to charity. They are to be commended for doing
so but should not be allowed to treat charity as a get-out-jail card . . . .
[C]haritable works must be exceptional before they will support a more-lenient
sentence, for . . . it is usual and ordinary, in the prosecution of similar white
collar crimes involving high-ranking corporate executives . . . to find that a
defendant was involved as a leader in community charities, civic
organizations, and church efforts. People who donate large sums because they
can should not gain an advantage over those who do not make such donations
because they cannot.
United States v. Vrdolyak, 593 F.3d 676, 682-83 (7th Cir. 2010) (internal citations omitted).
With respect to defendants wifes health and the collateral consequences of his
conviction, the Court must weigh these issues not only against the other 3553(a) factors,
but also against defendants other characteristics. In particular, defendant chose to repeatedly
commit fraud not because of financial need but instead based on greed and arrogance. See,
e.g., United States v. Anderson, 517 F.3d 953, 966 (7th Cir. 2008) (noting that district court
considered that defendant was well off financially and could have relaxed and enjoyed his
golden years and that [w]hile many criminals commit crimes from lack of opportunity and
desperation, [defendant] acted out of greed.). Defendant is highly educated and was a
successful professional. He graduated Magna Cum Laude from the University of Notre
7
Dame with a degree in business administration-accountancy. He then obtained a Master of

Business Administration degree from Northwestern University, graduating with distinction.
He was a licensed Certified Public Accountant from 1970 to 2010, and began working at
Deloitte in 1970. He was a partner from 1978 to 2010. Defendants education, experience,
and financial condition make clear that he absolutely knew better than to do what he did, and
his crimes are all the more egregious given his stature in society.
The situation regarding defendants wifes health and the collateral consequences of
his conviction are unfortunate, but do not materially differ from circumstances that each and
every defendant sentenced by the Court faces. That is why, presumably, with respect to
family needs, the Sentencing Commission has expressed in a policy statement that family ties
and responsibilities are not ordinarily relevant in determining whether a departure may be
warranted. U.S.S.G. 5H1.6. Moreover, with respect to the collateral consequences of
defendants conviction, those collateral consequences are similar to those faced by every
white-collar defendant, and do not serve as an individualized mitigating factor related to
defendant.
D.
A Sentence at the Low-End of the Guidelines Will Provide Adequate

Deterrence to Others
The need to afford adequate deterrence to others is a critical part of the sentence to be
imposed in this case for a number of reasons. First and foremost, insider trading is the exact
type of crime in which deterrence matters. Insider trading is often a crime committed by
affluent and well-educated defendants. In this case, as in most insider trading cases, it was
not a crime of need or passion. It was a crime based on greed and an arrogant belief that
defendant would not be caught. Crimes of this nature can be deterred with punishment that
includes terms of incarceration. Other would-be defendants who are thinking about using
their positions of trust to misappropriate material, non-public information will think twice
if they believe their actions will have serious consequences. These consequences cannot
simply be disgorgement of ill-gotten gains or the payment of fines. Instead, the consequences
need to include more than mere token sentences of incarceration to be effective in deterring
others.
Similarly, because insider trading cases are difficult to detect and prove, it is also
particularly important that sentences in this and other insider trading cases serve to deter
individuals from committing the same crime. See United States v. Heffernan, 43 F.3d 1144,
1149 (7th Cir. 1994) (Considerations of (general) deterrence argue for punishing more
heavily those offenses that either are lucrative or are difficult to detect and punish, since both
attributes go to increase the expected benefits of a crime and hence the punishment required
to deter it.).
A sentence at the low-end of the Guidelines serves the goal of deterrence in this case.
Such a sentence would be a strong message to other would-be insider trading defendants that
their conduct is serious and will be punished accordingly.
E.
Policy Statements from the Sentencing Commission Favor a Sentence at

the Low-End of the Guidelines
Policy statements from the Sentencing Commission, along with recent proposed
amendments to the Sentencing Guidelines based on Congressional directives, make clear that
insider trading is a crime warranting a significant sentence of incarceration.
The
Commissions policy as to white-collar offenses such as insider trading is set forth in

Guideline Chapter 1 Part A, introductory comment 4(d):
Under pre-guidelines sentencing practice, courts sentenced to probation an
inappropriately high percentage of offenders guilty of certain economic
crimes, such as theft, tax evasion, antitrust offenses, insider trading, fraud, and
embezzlement, that in the Commissions view are serious.
The Commissions solution to this problem has been to write guidelines
that classify as serious many offenses for which probation previously was
frequently given and provide for at least a short period of imprisonment in
such cases. The Commission concluded that the definite prospect of prison,
even though the term may be short, will serve as a significant deterrent,
particularly when compared with pre-guidelines practice where probation, not
prison, was the norm.
As further elaborated by then Circuit Judge, now Supreme Court Justice, Stephen
Breyer, who served on the Sentencing Commission when the Guidelines were drafted:
A second area of traditional compromise involves the Commissions
decision to increase the severity of punishment for white-collar crime. The
Commission found in its data significant discrepancies between pre-Guidelines
punishment of certain white-collar crimes, such as fraud, and other similar
common law crimes, such as theft. The Commissions statistics indicated that
where white-collar fraud was involved, courts granted probation to offenders
more frequently than in situations involving analogous common law crimes;
furthermore, prison terms were less severe for white-collar criminals who did
not receive probation. To mitigate the inequities of these discrepancies, the
Commission decided to require short but certain terms of confinement for
many white-collar offenders, including tax, insider trading, and antitrust
offenders, who previously would have likely received only probation.
10
Stephen Breyer, The Federal Sentencing Guidelines and the Key Compromises Upon Which
They Rest, 17 Hofstra L. Rev. 1, 20-21 (1988).
The Sentencing Commissions sentencing philosophy on white-collar cases is further
reinforced through amendments the Sentencing Commission has proposed to the Guidelines,
including a proposed amendment to 2B1.4, the insider trading guideline. The amendments
stem from the Dodd-Frank Wall Street Reform and Consumer Protection Act, which directed
the Sentencing Commission to amend the Guidelines related to securities fraud to, among
other things, emphasize the effectiveness of incarceration in deterring others. See Pub. L.
111-203, Section 1079A(a)(1)(B)(i)(I)-(III) (2010).
Pursuant to the Dodd-Frank Act, the Sentencing Commission has proposed
amendments to Guideline 2B1.4. See United States Sentencing Commission, Amendments
to
the
Sentencing
Guidelines,
at
2,
April
30,
2012,
available
at
http://www.ussc.gov/Legal/Amendments/Reader-Friendly/20120430_RF_Amendments.pdf.
The amendments provide a new specific characteristic for offenses involving an organized
scheme to engage in insider trading. Id. In such circumstances, a defendants minimum
offense level would be 14. According to the Commission, the amendment reflects the
Commissions view that a defendant who engages in considered, calculated, systematic, or
repeated efforts to obtain and trade on inside information (as opposed to fortuitous or
opportunistic instances of insider trading) warrants, at a minimum, a short but definite period
of incarceration. Id.
11
While the amendment would not change defendants advisory Guidelines range in this
case because of the amount of defendants gain, it is still instructive because it shows that
when, as here, a defendants conduct is part of a considered, calculated, systematic, or
repeated effort to obtain and trade on inside information, and not based on happenstance, a
more serious sanction is warranted. Indeed, pursuant to the amendment, a defendant who
engages in illegal insider trading and receives no gain would have an offense level of 12 with
acceptance of responsibility. That would correspond to an advisory Guidelines range of 1016 months imprisonment, higher than the sentence defendant seeks in this case even though
he gained nearly $500,000 from his pattern of illegal insider trading involving a significant
breach of his fiduciary duty owed to his employer and its clients.
F.
The Need to Avoid Unwarranted Sentencing Disparities
Defendant, in his version of the offense, argues that the need to avoid unwarranted
sentencing disparities strongly favors a sentence substantially below the Guidelines range.
In support, defendant cites Sentencing Commission statistics showing that, for example, in
2011 approximately 70% of non-cooperating defendants in insider trading cases received
sentences below the advisory Sentencing Guidelines range.
Defendant, however, fails to explain how sentencing him below the advisory
Guidelines range based on these statistics actually promotes avoiding unwarranted sentencing
disparities. In fact, Seventh Circuit case law is expressly to the contrary. As the Seventh
Circuit has stated, [t]he best way to curtail unwarranted disparities is to follow the
Guidelines, which are designed to treat similar offenses and offenders similarly. See United
12
States v. Bartlett, 567 F.3d 901, 908 (7th Cir. 2009).

Moreover, defendants argument does not account for the fact that because a
defendants gain correlates to the length of the defendants Guidelines range, some insider
trading cases may result in very long advisory Guidelines ranges, which some judges may
find longer than necessary to achieve the goals of sentencing. By way of example, the report
defendant cites in his version of the offense notes the sentences for Zvi Goffer and Raj
Rajaratnam, defendants in separate insider trading cases prosecuted in the Southern District
of New York. Goffer received a ten year sentence, one month below the 121 to 151 month
advisory Guidelines range in his case. Rajaratnam received an eleven year sentence, below
the 235 to 293 month range called for under the advisory Guidelines. Those cases, and
others in which below-Guidelines range sentences were imposed, could be a product of a
substantial sentence of incarceration that falls below the advisory Guidelines range because
the range itself is very high.
By contrast, in this case, defendants advisory Guidelines range of 37 to 46 months
imprisonment provides an accurate barometer for defendants prolonged fraudulent conduct
and his egregious breach of his fiduciary duty to his employer and its clients. Defendant
abused a position of trust and a fiduciary duty to his clients when he repeatedly traded based
on inside information he misappropriated. His conduct resulted in profits to himself of nearly
$420,000 and to one of his sons of nearly $50,000. Under those circumstances, a sentence
of 37 months imprisonment is both appropriate and reasonable under the 3553(a) factors.
13
III.
Conclusion
For the reasons stated above, the government respectfully asks that the Court sentence
defendant at the low-end of the advisory Guidelines range of 37 to 46 months imprisonment.
Respectfully submitted,
GARY S. SHAPIRO
Acting United States Attorney
By:
/s/ Jason A. Yonan

JASON A. YONAN
Assistant U.S. Attorney
219 South Dearborn St., Rm. 500
Chicago, Illinois 60604
(312) 353-4156
Dated: October 19, 2012
14
Case 1:10-cv-04885 Document 1
Filed 08/04/10 Page 1 of 29
UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
__________________________________________
)
SECURITIES AND EXCHANGE
)
COMMISSION,
)
)
Plaintiff,
)
)
v.
) Civil Action No.
)
THOMAS P. FLANAGAN, AND
)
PATRICK T. FLANAGAN,
)
)
Defendants.
)
)
COMPLAINT
Plaintiff, Securities and Exchange Commission (Commission) alleges:
SUMMARY
1.
This case involves repeated insider trading by Thomas P. Flanagan (Flanagan),
a former partner and a Vice Chairman at Big Four accounting firm Deloitte and Touche LLP
(Deloitte). Flanagan traded in the securities of multiple Deloitte clients on the basis of inside
information that he learned through his duties as a Deloitte partner. The inside information
concerned market moving events such as earnings results, revisions to earnings guidance, sales
figures and cost cutting, and an acquisition. Flanagans illegal trading resulted in profits of more
than $430,000.
2.
Flanagan also tipped his son Patrick to certain of this material nonpublic
information. Patrick then traded based on that information. Patricks illegal trading resulted in
profits of more than $57,000.
3.
Defendants Flanagan and Patrick directly and indirectly engaged in, and unless
enjoined, will continue to engage in transactions, acts, practices, and courses of business which
violate Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 (Exchange Act) [15
U.S.C. 78(b) and 78n(e)] and Rules 10b-5 and 14e-3 thereunder [17 C.F.R. 240.10b-5 and
240.14e-3].
4.
The Commission brings this action pursuant to Sections 21(d), 21(e), and 21A of
the Exchange Act [15 U.S.C. 78u(d), 78u(e), and 78u-1] seeking a permanent injunction,
disgorgement of trading profits plus prejudgment interest, and civil penalties.
JURISDICTION AND VENUE
5.
This Court has subject matter jurisdiction over this action pursuant to Sections 21
and 27 of the Exchange Act [15 U.S.C. 78u and 78aa].

6.
This Court has personal jurisdiction over the Defendants, and venue is proper in
this Court, because both of the Defendants reside in this District and the acts, transactions,
practices and course of conduct giving rise to the violations alleged in this Complaint occurred in
this District.
DEFENDANTS
7.
Thomas P. Flanagan, CPA, age 62, of Chicago, Illinois, is a certified public
accountant licensed to practice in the state of Illinois. He began working at Deloittes predecessor
firm in 1970, and was a partner at Deloitte and its predecessor firms from 1978 until September
2008. At the time of his departure from Deloitte, Flanagan was a Vice Chairman in Deloittes
Chicago office and had over 35 years of public-company audit experience.
8.
Patrick T. Flanagan, age 40, is a resident of Glencoe, Illinois and is Flanagans
son. Patrick has an M.B.A. from Northwestern University and has worked in various roles at
public and private companies. He is currently the Chief Operations Officer for a private
company in the health care industry.
RELEVANT ENTITIES
9.
Deloitte & Touche LLP is a Delaware limited liability partnership. Deloitte is a
subsidiary of Deloitte LLP, which is a US member firm of Deloitte Touche Tohmatsu, a Swiss
Verein, that is organized as an association of independent member firms worldwide which
provides professional services under the Deloitte brand name. At all relevant times and
continuing to the present, Deloitte has provided auditing services to a variety of companies,
including companies whose securities are registered with the Commission and traded in the U.S.
markets.
10.
Best Buy Co., Inc. (Best Buy) is a Minnesota corporation based in Richfield,
Minnesota. Its common stock is registered with the Commission pursuant to Section 12(b) of the
Exchange Act and is traded on the New York Stock Exchange and the Chicago Stock Exchange.
11.
Motorola, Inc. (Motorola) is a Delaware corporation based in Schaumburg,
Illinois. Its common stock is registered with the Commission pursuant to Section 12(b) of the
Exchange Act and is traded on the New York Stock Exchange.
12.
Walgreen Company (Walgreens) is an Illinois corporation based in Deerfield,
Illinois. Its common stock is registered with the Commission pursuant to Section 12(b) of the
Exchange Act and is traded on the New York Stock Exchange, NASDAQ, and the Chicago
Stock Exchange.
13.
Option Care, Inc. (Option Care) was a Delaware corporation based in
Buffalo Grove, Illinois. Its common stock was registered with the Commission pursuant to
Section 12(g) of the Exchange Act [15 U.S.C. 78l(g)] until approximately August 2007, and
was traded on the NASDAQ. Walgreens acquired Option Care in August 2007.
14.
Sears Holding Corporation (Sears) is a Delaware corporation based in
Hoffman Estates, Illinois. Its common stock is registered with the Commission pursuant to
Section 12(b) of the Exchange Act and is traded on the NASDAQ.
FACTS
A.
Background
15.
For over 35 years, Flanagan worked at Deloitte and its predecessor firms.
Flanagan served as a Vice Chairman in Deloittes Chicago office and as the Advisory Partner on
several of Deloittes audit engagements with its large clients.
16.
As the Advisory Partner, Flanagan, among other things, served as a liaison
between the audit clients management team and the Deloitte audit engagement team, attended
the clients Audit Committee meetings, and received and had access to material nonpublic
information regarding the clients earnings results and other information.
17.
Flanagan served as the Advisory Partner on Deloittes audit engagements with
Best Buy, Sears, and Walgreens, and served as a partner on Deloittes consulting engagement
with Motorola.
18.
Flanagan owned or controlled trading accounts held in his name and jointly with
his wife. He also controlled accounts in the name of his sons Michael L. Flanagan (Michael)
and Brien J. Flanagan (Brien), and sister-in-law Mia Pascale (Mia). He also controlled
trading accounts in the name of the Luke R. Pascale Irrevocable Trust (Pascale Trust), a trust
established by his father-in-law for Flanagans wife and her siblings. Flanagan is the trustee for
the Pascale Trust. Flanagan had the authority to make trades in all of these accounts.
19.
Patrick owned and controlled several trading accounts in Patricks name.
20.
Flanagan and Patrick are father and son and have a close relationship. Flanagan
and Patrick spoke on the telephone and emailed each other frequently, served on the board of a
local private high school together, and their families vacationed together. Patrick also sought his
fathers advice on employment and business matters.
B.
Flanagan and Patrick Traded on the Basis of Inside Information

21.
Between 2003 and 2008, Flanagan made 71 purchases of stock and options in the
securities of Deloitte audit clients. Flanagan made 62 of these purchases in the securities of
Deloitte audit clients while serving as the Advisory Partner on those audits.
22.
On at least 9 occasions between 2005 and 2008, Flanagan traded on the basis of
material nonpublic information. Flanagan traded on the basis of material nonpublic information
about Best Buy, Motorola, Sears, and Walgreens. On at least 4 occasions, Flanagan tipped
Patrick who also traded based on this material nonpublic information. Flanagan benefited from
his tips to his son Patrick.
23.
Flanagan learned this information through his duties at Deloitte. Flanagan owed a
fiduciary duty of trust and confidence to Best Buy, Motorola, Sears, and Walgreens as well as to
Deloitte to keep this information confidential and not to trade on or disclose this information.
Patrick knew or should have known that the information that Flanagan gave him had been
provided in breach of a fiduciary duty to his fathers clients and to Deloitte.
24.
Flanagan made all of these trades in accounts that he owned and in accounts that
he controlled for the benefit of Michael, Brien, Mia, and the Pascale Trust. Patrick made his
trades in accounts that he owned and controlled.
Insider Trading in Walgreens

25.
On October 1, 2007, before the stock market opened, Walgreens publicly
announced that it earned $.40 per share for the fourth quarter of 2007 which ended on August 31,
2007. This was 14.8% less than the $.47 earnings per share that stock market analysts had
forecasted. This was Walgreens first earnings decrease in nearly a decade. That day,
Walgreens stock price closed at $40.16, a 15% decline from the $47.24 closing price on
September 28, 2007, the previous trading day.
26.
Flanagan learned of Walgreens lower-than-expected fourth quarter earnings
results prior to the public release of this information and traded on the basis of this information.
He also tipped Patrick about the earnings results before the information became public. Patrick
then purchased Walgreens put options.
27.
On the morning of September 25, 2007, a staff member on Deloittes Walgreens
engagement team emailed to Flanagan a copy of Walgreens income statement for the fourth
quarter of 2007 and fiscal year 2007. The income statement showed that Walgreens had earned
$.40 per share for the fourth quarter of 2007.
28.
Later that morning, Flanagan participated in a phone call with the lead
engagement partner, senior manager, and a manager on Deloittes Walgreens engagement team
to discuss Walgreens fourth quarter and year-end results in advance of Walgreens upcoming
earnings press release. The engagement team updated Flanagan about Walgreens financial
results, including the $.40 per share earnings figure.
29.
During the evening of September 25, 2007, the senior manager sent Flanagan a
draft earnings press release from Walgreens stating that Walgreens had earned $.40 for the fourth
quarter of 2007, which represented a 3.8% decline from the same quarter of the prior year.
30.
Flanagan tipped Patrick to Walgreens quarterly earning results before the
information became public. Within 10 minutes of receiving the draft earnings press release,
Flanagan called Patrick twice for a total of five minutes.
31.
At 9:26 a.m. on September 26, 2007, Patrick purchased 100 out-of-the-money
Walgreens October put option contracts with a strike price of $45 for $.35 per contract. He paid
$3,585 for these contracts.
32.
A put option contract gives its owner the right to sell a specified amount of stock
within a specified time at a specified price (known as the strike price). A put option buyer
typically hopes that the stock will drop in price.
33.
Put options are out-of the-money when the strike price is lower than the current
market price of the underlying stock at the time of sale. For example, if XYZ stock is trading at
$50, and an investor buys put options with a $45 strike price, the puts are out-of-the-money. By
contrast, put options are in-the-money when the strike price is above the current market price.
Options said to be trading at-the-money have a strike price that is the same as the underlying
share price. When the strike price is the same or within a few cents of the current market price,
the option is said to be trading at-the-money.
34.
At 6:08 p.m. on September 27, 2007, Flanagan received an email from
Walgreens Controller, in advance of Walgreens Audit Committee meeting scheduled for 2 p.m.
the next day. The Controller also sent this email to other expected meeting attendees. The email
contained a link to a secure Walgreens internal website where the email recipients could access
the draft earnings press release and financial statements announcing the $.40 earnings figure and
the meeting agenda. Flanagan forwarded the email to his assistant at 7:12 p.m., with orders that
she print out the documents and hand them to him.
35.
Approximately 40 minutes later, Flanagan called Patrick, speaking for four
minutes.
36.
Flanagan called his stock broker at 9:52 a.m. on September 28, 2007, speaking for
four minutes. At 10:40 a.m., Flanagan purchased for the Pascale Trust account 350 out-of-themoney Walgreens October put option contracts with a strike price of $47 for $1.079 per
contract. Flanagan paid $39,148 for these contracts.
37.
At 9:56 a.m., immediately after speaking with his broker, Flanagan called Patrick.
The call lasted one minute. At 11:40 a.m., Patrick purchased 35 out-of-the-money Walgreens
October put contracts with a strike price of $47 for $1.10 per contract. He paid $3,886 for
these contracts.
38.
On October 1, 2007, after Walgreens issued its earnings press release, Flanagan
sold the 350 put option contracts that he bought in the Pascale Trust account. He sold 175 of the
contracts on October 1 for $7.10 per contract, realizing a profit of $103,362. He sold 85
contracts on October 3 for $7.40 per contract, realizing a profit of $52,629. He sold the
remaining 90 contracts on October 5 for $8 per contract, realizing a profit of $61,338. Flanagan
realized a total profit of $217,329.
39.
On October 1, 2007, Patrick sold the 100 put contracts with a $45 strike price for
between $3.60 and $3.80 per contract, and sold the 35 put contracts with a $47.50 strike price for
between $6.20 and $7 per contract. He realized a profit of $50,778.
Insider Trading in Motorola
40.
On January 23, 2008, before the stock market opened, Motorola announced in its
fiscal year 2008 earnings press release that sales of mobile devices had declined 38% during the
fourth quarter of 2007, which ended on December 31, 2007, from the fourth quarter of 2006.
Motorola also announced that it was aggressively rationalizing the companys cost structure.
By the end of the day, Motorolas stock price closed at $10.01, an 18.75% decline from the
$12.32 closing price on January 22, 2008.
41.
Flanagan learned of Motorolas sharp decline in mobile device sales and its plan
to aggressively cut costs before the public release of this information and traded on the basis of
this information.
42.
At the time he learned this information, Flanagan was a partner on Deloittes non-
audit consulting engagement with Motorola.

43.
On January 3, 2008, a Deloitte partner on the consulting engagement team for
Motorola met with Motorolas new CEO to provide recommendations for company strategy.
44.
The next day, the partner sent an email to Flanagan and several other members of
Deloittes Motorola engagement team. The email contained an Associated Press article from that
day concerning an analysts report that Motorolas handset sales had missed the Christmas
window.
45.
The partner wrote in the subject line of the email, Motorola Inc. Shares Decline
At our mtg yersterday (sic) [the CEO] said [Mobile Device] performance will be significantly
worse than anybody imagined and a huge across the board cost cutting is in the works.
46.
On the afternoon of January 11, 2008, Flanagan and the partner had a telephone
meeting lasting approximately 30 minutes to discuss the Motorola situation.

47.
On the next trading day, January 14, 2008, Flanagan purchased for his own
account 585 out-of-the-money Motorola February put contracts with a strike price of $13 for
$.17 per contract.
48.
Filed 08/04/10 Page 10 of 29
On January 23, 2008, shortly after Motorola issued its press release, Flanagan
sold all 585 put option contracts for a total profit of $137,474.
Insider Trading in Option Care
49.
On July 2, 2007, Walgreens publicly announced that it had reached an agreement
to acquire Option Care for $19.50 per share. That day, Option Cares stock price closed at
$19.24 per share, up 25%, from its $15.40 closing price on June 29, 2007, the prior trading day.
50.
Flanagan learned about the acquisition agreement before the public release of this
information and traded on the basis of this information. He also tipped Patrick before the
information became public. Patrick then purchased Option Care stock.
51.
At the time Flanagan and Patrick traded, substantial steps had been taken to
commence Walgreens tender offer for the shares of Option Care stock. Specifically, Walgreens
and Option Care had entered into a confidentiality agreement, hired financial advisors, were
cooperating in Walgreens due diligence investigation, exchanged drafts of the acquisition
agreement, and were negotiating the final per share purchase price.
52.
At 5 p.m. on June 18, 2007, Flanagan participated in a conference call with the
lead engagement partner, senior manager, and other staff on Deloittes Walgreens engagement
team in advance of several meetings with Walgreens executives scheduled for June 20, 2007.
During the call, the Deloitte engagement team informed Flanagan that Walgreens acquisition of
Option Care was imminent and that the engagement team was monitoring it. The team also
explained and discussed Option Cares several business lines with Flanagan.
53.
At 5:42 p.m., approximately 10 minutes after the end of the conference call,
Flanagan sent an email to his broker telling him to call Flanagans cell phone. Flanagan called
10
Filed 08/04/10 Page 11 of 29
his broker at 8:19 a.m. on June 19, 2007, speaking for four minutes. His broker called Flanagan
back at 8:49 a.m., speaking for 16 minutes, and again at 9:07 a.m., speaking for two minutes
54.
At 9:24 a.m. on June 19, Flanagan purchased 850 shares in Briens account for
$15.47 per share and 1,500 shares of Option Care common stock in Michaels account for $15.48
per share. Flanagan paid a total of $36,790 for these 2,350 shares. Flanagan had never traded in
Option Care before.
55.
On June 20, 2007, Flanagan purchased 1,900 Option Care shares for $15.54 per
share in his own account, and 1,900 shares for $15.58 in the Pascale Trust account. Flanagan
paid a total of $59,727 for these 3,800 shares.
56.
After he made these stock purchases, Flanagan attended several meetings with
Walgreens executives on June 20, 2007 in advance of Walgreens Audit Committee meeting
scheduled for the next day. In one of those meetings, Walgreens CEO told Flanagan and
Deloittes lead audit engagement partner that Walgreens was soon likely to announce an
agreement to acquire Option Care.
57.
Flanagan tipped Patrick about the Option Care acquisition before the information
became public. Flanagan first called Patrick at 5:40 p.m. on June 18, 2007, just before Flanagan
emailed his broker. Flanagans call lasted two minutes. Between the June 18, 2007 conference
call and the evening of June 20, 2007, Flanagan and Patrick called each other eight times for a
total of 20 minutes. Flanagans last calls to Patrick were on the evening of June 20, 2007, after
Flanagans meetings with Walgreens executives.
58.
On the morning of June 21, 2007, Patrick purchased 1,200 Option Care shares for
$15.40 per share. Patrick paid $18,494 for these shares. Patrick had never traded in Option Care
before.
11
59.
Filed 08/04/10 Page 12 of 29
On July 10, 2007, Flanagan sold all of the Option Care shares in his account and
the accounts he controlled for the Pascale Trust, Michael, and Brien on the morning of July 10,
2007 for between $19.32 and $19.33 per share. Flanagan made a profit of $6,581 in his account,
$6,488 in the Pascale Trust account, $5,246 in Michaels account, and $2,918 in Briens account.
60.
Patrick sold 800 Option Care shares on the same day as his father for $19.32 per
share, realizing a profit of $3,114. Patrick sold another 200 shares on July 24, 2007 for $19.39
per share. Patrick received a cash settlement for the remaining 200 shares from Walgreens on
September 12, 2007 for $19.50 per share, as part of the tender offer. In total, Patrick made a
profit of $4,714.
Insider Trading in Sears
61.
On May 29, 2008, before the stock market opened, Sears publicly announced an
earnings loss of $.43 per share for the first quarter, which ended May 3, 2008. Stock market
analysts had previously estimated that Sears would report a first quarter profit of $.21 per share.
On May 29, 2008, Sears stock price closed at $86.14 per share, a 3.6% decline from the $89.36
closing price on May 28, 2008.
62.
Flanagan learned of Sears lower-than-expected first quarter earnings per share
results prior to the public release of this information and traded on the basis of this information.
He also tipped Patrick before the information became public. Patrick then purchased Sears put
options.
63.
On May 16, 2008, the lead engagement partner on Deloittes Sears engagement
team sent Flanagan an email containing the first draft of Sears earnings press release. The
release described Sears earnings results for the first quarter and included the $.43 per share
earnings loss.
12
64.
Filed 08/04/10 Page 13 of 29
On the morning of May 19, 2008, the first trading day after he received the lead
engagement partners email, Flanagan purchased for the Pascale Trust account 85 out-of-themoney Sears June put contracts with a strike price of $90 for $3.60 per contract. Flanagan paid
$31,020 for these contracts.
65.
Flanagan tipped Patrick about Sears unexpected earnings loss before the
information became public. Between May 17, 2008 and Monday, May 25, 2008, Flanagan and
Patrick spoke 15 times on the phone for a total of 43 minutes.
66.
On May 22, 2008, Flanagan received an email from Sears Assistant Controller in
advance of a Sears Audit Committee teleconference scheduled for May 28, 2008. Documents
attached to the email included the draft press release, financial statements for the quarter, and the
draft Form 10-Q to be filed with the Commission. All of these documents contained the $.43 per
share earnings loss figure.
67.
At 8:00 a.m. on May 28, 2008, Flanagan attended the Sears Audit Committee
teleconference meeting, during which the quarterly earnings report was discussed in detail.
68.
At 9:31 a.m. on May 28, 2008, Patrick called Flanagan. At 9:59 a.m., less than an
hour after the Audit Committee meeting ended, Flanagan called Patrick. They spoke for two
minutes.
69.
At 10:07 a.m., six minutes after hanging up with his father, Patrick logged into his
on-line trading account. This was the first time Patrick had accessed his account that day.
70.
At 10:34 a.m., Patrick bought 40 out-of-the-money Sears June put option
contracts with a strike price of $85 for $3.40 per contract. Patrick paid $13,639 for these
contracts. Patrick had never traded in Sears before.
13
71.
Filed 08/04/10 Page 14 of 29
On the afternoon of May 29, 2008, after Sears issued its earnings press release,
Patrick sold 20 of his put option contracts for a loss of $1,343.

72.
On May 30, 2008, Flanagan sold all of his 85 put option contracts for $7 each, for
a profit of $27,946.
73.
On June 6, 2008, Patrick sold the remaining 20 put option contracts at $4.70 each
for a profit of $2,547.

Insider Trading in Best Buy
I.
Best Buy Q3 2006 Earnings Release (December 2005)
74.
On December 13, 2005, before the stock market opened, Best Buy publicly
announced that it earned $.28 per share for the third quarter of 2006 which ended on November
26, 2005. The quarterly earnings per share was at the low end of the $.28 to $.32 earnings per
share range that Best Buy had previously provided in its earnings guidance. Best Buys earnings
per share were also 6.7% less than the $.30 per share that stock market analysts had forecasted.
On December 13, 2005, Best Buys stock price closed at $43.94, an 11.8% decline from its
$49.84 closing price on December 12, 2005.
75.
Flanagan learned of Best Buys less-than-expected third quarter earnings per
share results prior to the public release of this information and traded on the basis of this
information.
76.
On the morning of December 8, 2005, Flanagan received an email from the
assistant to Best Buys Vice President of Finance, Planning & Reporting Management in
advance of Best Buys Audit Committees pre-earnings release conference call scheduled for the
afternoon of December 9, 2005. Documents attached to this email included the Third Quarter
Performance Summary, Consolidated Statement of Earnings, and the Consolidated Condensed
14
Filed 08/04/10 Page 15 of 29
Balance Sheets. All of these documents contained Best Buys third quarter earnings results of
$.28 per share. The Performance Summary also contained the $.30 earnings per share figure
forecasted by stock market analysts.
77.
Later that same morning, Flanagan received another email from the assistant
containing the same documents.

78.
On the morning of December 9, 2005, Flanagan purchased 13 out-of-the-money
Best Buy March put option contracts with a strike price of $47 for $2.70 per contract for Mias
account. Flanagan paid $3,684 for these contracts.
79.
On December 14, 2005, the day after Best Buy publicly announced its earnings
results, Flanagan sold all 13 put option contracts for $4.90 per contract and realized a profit of
$2,480.
II.
Best Buys Q3 2007 Earnings Press Release (December 2006)
80.
On December 12, 2006, before the stock market opened, Best Buy publicly
announced that it earned $.31 per share for the third quarter of 2007 which ended on November
25, 2006. This was 11.4% less than the $.35 earnings per share that stock market analysts had
forecasted. On December 12, 2006, Best Buys stock price closed at $51.30, a 4.9% decline
from the $53.92 closing price on December 11, 2007.
81.
Flanagan learned of Best Buys lower-than-expected third quarter earnings results
prior to the public release of this information and traded on the basis of this information. He also
tipped Patrick before the information became public. Patrick then purchased Best Buy put
options.
82.
In the early afternoon of December 8, 2006, Flanagan received an email from the
assistant to Best Buys Vice President of Finance, Planning & Reporting Management (Vice
15
Filed 08/04/10 Page 16 of 29
President of Finance) in advance of the Audit Committees pre-earnings release conference call
scheduled for the morning of December 11, 2006. The assistant also sent this email, which was
labeled Confidential, to other expected meeting attendees. Documents attached to this email
included the Third Quarter Performance Summary, Consolidated Statement of Earnings, and the
Consolidated Condensed Balance Sheets. All of these documents contained Best Buys quarterly
earnings results of $.31 per share. The Performance Summary also contained the $.35 per share
earnings forecasted by stock market analysts.
83.
Approximately two hours later, Flanagan and other expected meeting attendees
received an email, labeled Confidential, from Best Buys Vice President for Finance
containing Best Buys current year-to-date results, its original annual earnings guidance for fiscal
year 2007, and its updated earnings guidance.
84.
Later on the evening of December 8, 2006, a Deloitte partner on the Best Buy
engagement team forwarded the assistants email to Flanagan and other members of the Deloitte
engagement team.
85.
On Saturday, December 9, 2006, Flanagan tipped Patrick about Best Buys
earnings results before the information became public. Telephone records show that Flanagan
called Patrick three times that day for a total of 11 minutes.
86.
At the stock markets opening on Monday, December 11, 2006, the first trading
day after he learned the earnings results from his father, Patrick bought 35 out-of-the-money
Best Buy December put option contracts with a strike price of $52.50 for $1.25 per contract for
his account. At the same time, Patrick also purchased 15 out-of-the-money Best Buy December
put option contracts with a strike price of $55 for $2.50 per contract for his account. Patrick paid
16
Filed 08/04/10 Page 17 of 29
a total of $8,182 for these 50 contracts. All of these contracts were set to expire on December
16, 2006.
87.
Patrick purchased these contracts with the intention of selling them immediately
after Best Buy publicly announced its earnings results because he already knew what Best Buy
would announce for its earnings results. At 9:24 p.m. on December 11, 2006, Patrick created an
entry on his electronic calendar for 7:15 a.m. on December 12, 2006 that read, Schwab
closing bby. BBY is Best Buys stock ticker symbol.
88.
At 9:40 a.m., Flanagan bought for the Pascale Trust account 40 out-of-the-money
Best Buy December put option contracts with a strike price of $55 for $2.38 - $2.40 per contract.
Flanagan paid $9,871 for these contracts. These contracts were set to expire on December 16,
2006.
89.
On December 12, 2006, shortly after Best Buy issued its press release announcing
its earnings, Flanagan and Patrick sold all their put option contracts. Flanagan sold his contracts
for $4.01 per contract for a profit of $5,836. Patrick sold his contracts for a profit of $2,270.
III.
Best Buys Q1 2008 Earnings Press Release (June 2007)
90.
On June 19, 2007, before the stock market opened, Best Buy publicly announced
that it earned $.39 per share for the first quarter of 2008 which ended on June 2, 2007. This
represented an 18% decline from the prior years first quarter earnings per share and was 22%
lower than the stock market analysts consensus estimate of $.50 per share. On June 19, 2007,
Best Buys stock price closed at $45.18, a 5.9% decline from the $48.01 closing price on June
18, 2007.
17
91.
Filed 08/04/10 Page 18 of 29
Flanagan learned of Best Buys lower-than-expected first quarter earnings per
share results prior to the public release of this information and traded on the basis of this
information.
92.
On June 15, 2007, Flanagan received an email from the assistant to Best Buys
Vice President of Finance in advance of Best Buys Audit Committee pre-earnings release
conference call scheduled for the afternoon of June 18, 2007. Documents attached to this email
included the Third Quarter Performance Summary, Consolidated Statement of Earnings, and the
Consolidated Condensed Balance Sheets. All of these documents contained Best Buys quarterly
earnings of $.39 per share. The Performance Summary also contained the $.50 per share
earnings figure estimated by stock market analysts.
93.
At 8:00 a.m. on Monday, June 18, 2007, the first trading day after he received this
email, Flanagan bought for his own account 210 out-of-the-money Best Buy August put option
contracts with a strike price of $45 for $.95 per contract. He also bought 315 of the same
contracts at the same price for the Pascale Trust account. Flanagan paid a total of $51,479 for
these 525 contracts.
94.
Flanagan sold 150 of the put option contracts in the Pascale Trust account for
$1.15 per contract on June 19, 2007, approximately two hours after Best Buy issued its earnings
press release, realizing a profit of $2,029.
95.
He sold the remaining 165 put options in the Pascale Trust account for $1.35 per
contract on June 20, 2007, realizing a profit of $5,538.

96.
Flanagan also sold the 210 put options in his account for $1.35 per contract on
June 20, 2007, realizing a profit of $7,025.
18
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IV.
Best Buys Press Release (February 2008)
97.
On February 15, 2008, before the stock market opened, Best Buy issued a press
release announcing a reduction to its fiscal year 2008 earnings forecast from a previous range of
$3.10 to $3.20 per share to a range of $3.05 to $3.10. Best Buy cited weaker-than-expected
revenue growth from January sales in several major categories. Best Buy also lowered its
anticipated annual stores sales gains from approximately 4% to a range of 2.5% to 3%. Best Buy
also announced that its fourth quarter revenue would fall short of its internal targets. On
February 15, 2008, Best Buys stock price closed at $44.62, a 2.5% decline from the $45.77
closing price on February 14, 2008.
98.
Prior to the issuance of the press release, Best Buy had not announced the weaker-
than-expected revenue growth from January sales, lower anticipated annual stores sales gains,
and fourth quarter revenue shortfall. Best Buy had publicly reiterated its 2008 earnings guidance
of $3.10 to $3.20 per share a month earlier on January 11, 2008.
99.
Flanagan learned that Best Buy was going to announce a reduction to its 2009
earnings and annual store sales gain guidance, and the fourth quarter revenue shortfall prior to
the public announcement and traded on the basis of that information.
100.
On February 12, 2008 at 7:45 p.m., the lead engagement partner on the Best Buy
engagement team sent an email to Flanagan and another member of Deloittes engagement team.
The lead engagement partner attached a draft of Best Buys February 15, 2008 press release.
The draft press release included the same information regarding Best Buys weaker-thanexpected revenue growth from January sales, lower anticipated annual stores sales gains, and
fourth quarter revenue shortfall that was contained in Best Buys press release issued to the
public.
19
101.
Filed 08/04/10 Page 20 of 29
In her email, the lead engagement partner provided a summary of the earnings
guidance figures for fiscal year 2008 that Best Buy had previously provided to the public. The
summary also contained the reduced earnings guidance figures for fiscal year 2008 that Best Buy
included in its draft and final February 15, 2008 press releases. The lead engagement partner
also stated in her email that, sales fell off a cliff in the last month with superbowl (sic)
missing all expectations
102.
That night, Flanagan replied to the lead engagement partners email, directing her
to call him on February 13 or 14, 2008.

103.
When the stock market opened on February 13, 2008, Flanagan purchased 100
out-of-the-money Best Buy March put contracts with a strike price of $45 for the Pascale Trust
account for $1.95 per contract. He also purchased 50 Best Buy March put contracts with a strike
price of $45 for his own account for $1.95 per contract. Flanagan paid a total of $28,850 for
these 150 contracts.
104.
Flanagan sold all 100 put contracts in the Pascale account for between $2.30 and
$2.34 per contract on March 5, 2008, realizing a profit of $2,823.

105.
Flanagan also sold all 50 put contracts in his own account for between $2.65 and
$2.72 per contract on March 5, 2008, realizing a profit of $3,011.

V.
Best Buys Q4 Earnings Press Release (April 2008)
106.
On April 2, 2008, before the stock market opened, Best Buy publicly announced
that it earned $1.71 per share for the fourth quarter of 2008 which ended on March 1, 2008. This
represented a 10% increase from the prior years fourth quarter earnings per share and was 4%
higher than the stock market analysts consensus estimate of $1.65 earnings per share. On April
20
Filed 08/04/10 Page 21 of 29
2, 2008, Best Buys stock price closed at $43.94, a 1.08% increase from the $43.47 closing price
on April 1, 2008.
107.
Flanagan learned of Best Buys higher-than-expected fourth quarter earnings prior
to its public release and traded on the basis of this information.

108.
On March 28, 2008, Flanagan received an email from a Best Buy employee in
advance of Best Buys Audit Committee pre-earnings release conference call scheduled for the
afternoon of March 31, 2008. Documents attached to the email included the Fiscal 2008 Fourth
Quarter Performance Summary and the Condensed Consolidated Statement of Earnings. Both
documents included the $1.71 per share earnings figure. The Performance Summary also
contained the stock market analysts consensus earnings estimate of $1.65 per share.
109.
That afternoon, Flanagan forwarded this email to his assistant with orders to print
the attached documents.

110.
On March 31, 2008, Flanagan attended the Audit Committee conference call,
during which the earnings results and the stock market analysts estimates were discussed.
111.
On April 1, 2008, Flanagan bought for the Pascale Trust account 165 Best Buy
May call option contracts with a strike price of $42.50 for $2.45 per contract. Flanagan also
bought for his own account 85 Best Buy May call option contracts with a strike price of $42.50
for $2.45 per contract. Flanagan paid a total of $62,264 for these 250 contracts.
112.
A call option contract gives its owner the right to buy a specified amount of stock
within a specified time at a specified price (known as the strike price). A call option buyer
typically hopes that the stock will rise in price.
113.
On April 2, 2008, after Best Buy issued its press release, Flanagan sold 82 of the
call options in the Pascale Trust account for $3.20 per contract, realizing a profit of $5,441.
21
Filed 08/04/10 Page 22 of 29
Flanagan exercised the remaining 83 calls on May 16, 2008. By exercising the calls, Flanagan
bought the 8,300 underlying shares of Best Buy stock. He then sold the 8,300 shares on May 19,
2008 for a loss of $6,919. If Flanagan had instead sold the remaining 83 option contracts in the
Pascale Trust account at the close of trading on April 2, 2008, he would have made a profit of
$6,988.
114.
Flanagan exercised the 85 call options in his account on May 19, 2008 and sold
the resulting 8,500 shares the same day for $44.52 per share for a realized loss of $7,356. If
Flanagan had sold the 85 option contracts in his account at the close of trading on April 2, 2008,
he would have made profit of $5,525.
C.
Flanagan Concealed His Trading in the Audit Clients Securities and Circumvented
Deloittes Independence Compliance System
115.
Flanagan was required to comply with the Commissions auditor independence
rules with respect to the Deloitte audit clients he served as the Advisory Partner. Flanagan was
also required to comply with the Commissions auditor independence rules with respect to
certain other Deloitte audit clients because he worked in the same office as the lead partner on
those audits.
116.
Under the Commissions auditor independence rules, accountants are not
independent as to an audit client if, among other things, the accounting firm, or any covered
person in the firm, or any of his or her immediate family members, has a direct investment in the
audit client, such as stocks, bonds, notes, options, or other securities, or if the accountant serves
as the voting trustee of a trust containing securities of an audit client. Flanagan was a covered
person as to Best Buy, Sears, and Walgreens.
117.
Flanagan knew and understood the Commissions auditor independence rules.
22
118.
Filed 08/04/10 Page 23 of 29
Between 2003 and 2008, Flanagan made 71 purchases of stock and options in the
securities of Deloitte audit clients in violation of the Commissions auditor independence rules.
Flanagan made 62 of these purchases in the securities of Deloitte audit clients while serving as
the Advisory Partner on those audits. These purchases include the trades Flanagan made on the
basis of material nonpublic information in Best Buy, Sears, and Walgreens described above.
Flanagan made all of these purchases in accounts he owned, or in accounts he controlled for the
benefit of Michael, Brien, and Mia, and in the Pascale Trust account.
119.
At all relevant times, Deloitte had policies and quality control procedures in place
designed to ensure that its professional personnel maintain their independence relative to
Deloittes audit clients. Deloittes independence policies and procedures were primarily
contained in Deloittes Independence Manual.
120.
Flanagan knew and understood Deloittes independence policies and procedures.
Flanagan circumvented these policies and procedures.

121.
Deloittes independence policies and procedures required, among other things,
that its professional staff, including partners, self-report all of their securities holdings and
trading activities. These professionals were also required to report all securities trades that they
made as a trustee for accounts that they controlled. Deloitte created the Deloitte Entity Search
and Compliance system (DESC) and the Tracking and Trading system (Tracking and
Trading) for its professional staff to use to report these transactions.
122.
The DESC contained a Restricted Entity List, which contained the names of all
companies, banks, brokerage firms, and other institutions that Deloitte prohibited its professional
staff from, among other things, having a financial interest in or maintaining an account. All of
Deloittes audit clients within the United States, including the audit clients at issue here, were
23
Filed 08/04/10 Page 24 of 29
included in the Restricted Entity List, which Deloitte updated regularly. Prior to making a
securities trade, Deloitte required its professional staff to access the DESC and Restricted Entity
List to verify that the company, brokerage firm, or other entity involved in the transaction was
not restricted. After completing the transaction, its professional staff had 10 calendar days to
report it to Deloitte via Tracking and Trading.
123.
Deloittes Independence Manual also contained Deloittes policy prohibiting
insider trading and the disclosure of inside information.

124.
Deloitte required its professional staff to file annual Independence
Representations and affirm between 30 and 50 specific statements. These statements concerned
the staff members financial transactions during the previous year, understanding of, and
compliance with, Deloittes independence policies, and other topics. If the staff member
responded to a statement with anything other than Agree, the staff member had to provide a
written explanation, which Deloittes Independence and Ethics Compliance Group then
reviewed.
125.
Beginning in 2007, Deloittes professional staff had to affirm in their
Independence Representations that they had read and understood Deloittes policies related to
insider trading. Flanagan did so in October 2007.
126.
Flanagan concealed from Deloitte his trades in the securities of Deloittes clients,
including those described in this Complaint, by failing to report these trades in the Tracking and
Trading System. He also failed to report the existence of several trading accounts he owned or
controlled, including those in which he made the trades described in this Complaint.
24
127.
Filed 08/04/10 Page 25 of 29
Flanagan also lied to Deloitte about his compliance with Deloittes independence
policies. In the Independence Representations he filed in 2004, 2005, 2006, and 2007, Flanagan
falsely affirmed that:
a. Tracking and Trading accurately reflected the brokerage accounts and financial
interests held or controlled by Flanagan;
b. at no time during the representation period did he have a financial interest in a
Restricted Entity; and
c. he had not served as a trustee, executor, or administrator of an estate that had a
financial interest in a Restricted Entity.
128.
In fact, Flanagan owned or controlled several brokerage accounts, and owned and
controlled stocks and options, which he had not reported in Tracking and Trading. He also
owned or controlled stocks and options in Restricted Entities, including the Deloitte clients for
whom he served as an Advisory Partner. In addition, Flanagan served as the trustee for a family
trust and controlled brokerage accounts in the name of that trust and in the name of other family
members. Flanagan traded in the securities of Restricted Entities in several of these accounts.
129.
Flanagans efforts to conceal from Deloitte his trades in the securities of Deloitte
clients extended to the furnishing of false information in the preparation of his personal income
tax returns. He utilized Deloitte Tax LLP (Deloitte Tax) to prepare his tax returns. Flanagan
provided Deloitte Tax personnel with the names of the securities he purportedly traded during
the tax year, the trade dates, and his gains or losses. For the tax years 2004 through 2007,
Flanagan substituted the names of Deloitte audit clients whose securities he traded in with the
names of other entities for which he had no trading restrictions. Between 2004 and 2007,
25
Filed 08/04/10 Page 26 of 29
Flanagan substituted unrestricted company names for 13 trades that he made in the securities of
seven Deloitte clients, including Best Buy, Sears, and Walgreens.
CLAIMS FOR RELIEF
CLAIM ONE
Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder
(Against Defendants Thomas P. Flanagan and Patrick T. Flanagan)
130.
The Commission realleges and incorporates by reference Paragraphs 1 through
129 as though fully set forth herein.

131.
During the relevant time periods, Defendant Thomas P. Flanagan, in connection
with the purchase and sale of Best Buy, Motorola, Option Care, Sears, and Walgreens securities,
by use of the means and instrumentalities of interstate commerce and of the mails, directly and
indirectly: employed devices, schemes and artifices to defraud, made untrue statements of
material facts and omitted to state material facts necessary in order to make the statements made,
in the light of the circumstances under which they were made, not misleading; and engaged in
acts, practices and courses of business which operated as a fraud and deceit upon the purchasers
and sellers of such securities.
132.
During the relevant time periods, Defendant Patrick T. Flanagan, in connection
with the purchase and sale of Best Buy, Option Care, Sears, and Walgreens securities, by use of
the means and instrumentalities of interstate commerce and of the mails, directly and indirectly:
employed devices, schemes and artifices to defraud, made untrue statements of material facts and
omitted to state material facts necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading; and engaged in acts, practices and
courses of business which operated as a fraud and deceit upon the purchasers and sellers of such
securities.
26
Filed 08/04/10 Page 27 of 29
133.
Both Defendants acted with scienter when he engaged in the conducted alleged
134.
As a result of the activities described above, the Defendants violated Section
above.
10(b) of the Exchange Act [15 U.S.C. 78(b)] and Rule 10b-5 thereunder [17 C.F.R. 240.10b5].
CLAIM TWO
Violations of Section 14(e) of the Exchange Act and Rule 14e-3 Thereunder
(Against Defendants Thomas P. Flanagan and Patrick T. Flanagan)
135.
The Commission realleges and incorporates by reference Paragraphs 1 through 9,
12, 13, 15 through 24, 49 through 60, and 115 through 129 as though fully set forth herein.
136.
Prior to the public announcement of the tender offer for Option Care, and after a
substantial step or steps to commence the tender offer had been taken, Defendant Thomas P.
Flanagan purchased securities of Option Care while in possession of material information
relating to the tender offer, which information he knew or had reason to know was nonpublic and
had been acquired directly or indirectly from a person acting on behalf of the offering person; the
issuer of the securities sought or to be sought by the tender offer; or an officer, director, partner,
employee, or other person acting on behalf of the offering person or such an issuer.
137.
substantial step or steps to commence the tender offer had been taken, Defendant Thomas P.
Flanagan, while in possession of material information relating to the tender offer, which
information he knew or had reason to know was nonpublic and had been acquired directly or
indirectly from a person acting on behalf of the offering person; the issuer of the securities
sought or to be sought by the tender offer; or an officer, director, partner, employee, or other
person acting on behalf of the offering person or such issuer, communicated material nonpublic
27
Filed 08/04/10 Page 28 of 29
information relating to the tender offer to Patrick under circumstances in which it was reasonably
foreseeable that the communication was likely to result in the purchase of securities of Option
Care.
138.
substantial step or steps to commence the tender offer had been taken, Defendant Patrick T.
Flanagan purchased securities of Option Care, while in possession of material information
relating to the tender offer, which information he knew or had reason to know was nonpublic and
had been acquired directly or indirectly from a person acting on behalf of the offering person; the
issuer of the securities sought or to be sought by the tender offer; or an officer, director, partner,
employee, or other person acting on behalf of the offering person or such an issuer.
139.
By virtue of the foregoing, the Defendants violated Section 14(e) of the Exchange
Act [15 U.S.C. 78n(e)] and Rule 14e-3 [17 C.F.R. 240.14e-3] thereunder.
RELIEF REQUESTED
WHEREFORE, the Commission respectfully requests that the Court:
a. permanently enjoin Defendants Thomas P. Flanagan and Patrick T. Flanagan from
violating Sections 10(b) and 14(e) of the Exchange Act and Rules 10b-5 and 14e3 thereunder;
b. order Defendant Thomas P. Flanagan to disgorge with prejudgment interest all illgotten gains received as a result of the conduct alleged above, including the
trading profits in his accounts and accounts which he controlled and, on a joint
and several basis, Patricks trading profits;
28
Filed 08/04/10 Page 29 of 29
c. order defendant Patrick T. Flanagan to disgorge with prejudgment interest all illgotten gains received as a result of the conduct alleged above, including his own
trading profits on a joint and several basis with defendant Thomas P. Flanagan;
d. order Defendants Thomas P. Flanagan and Patrick T. Flanagan to pay civil
monetary penalties pursuant to Section 21A of the Exchange Act, and;
e. grant such other and further relief as the Court deems just and appropriate.
Respectfully submitted,
DATED: August 4, 2010
s/ Steven L. Klawans
STEVEN L. KLAWANS
JAMES G. OKEEFE
Attorneys for Plaintiff
U.S. SECURITIES AND EXCHANGE
COMMISSION
175 West Jackson Boulevard, Suite 900
Chicago, Illinois 60604
Telephone: (312) 886-1738 (Klawans)
Telephone: (312) 886-2239 (OKeefe)
Facsimile: (312) 353-7398
Email: KlawansS@sec.gov
Email: OkeefeJ@sec.gov
29
Case: 1:10-cv-04885 Document #: 8 Filed: 08/12/10 Page 1 of 5 PageID #:58

Deloitte Partner Thomas P. Planagan Busted For Insider Trading

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Deloitte Partner Thomas P. Planagan Busted For Insider Trading

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Ex-Deloitte Partner Gets 21 Months for Insider Trades - Bloomberg Business

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Ex-Deloitte Partner Gets 21 Months for Insider Trades - Bloomberg Business

Former Deloitte Partner Pleads Guilty to Illegally

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SEC Charges Former Deloitte Partner and Son With

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UNITED STATES DISTRICT COURT

GOVERNMENTS POSITION PAPER AS TO SENTENCING FACTORS

Deloitte & Touche to misappropriate material, nonpublic information belonging to Deloitte

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At the time defendant began misappropriating material, nonpublic information

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Application of 3553(a) Factors

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The Nature of Defendants Crime Weighs Strongly in Favor of a Sentence

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Defendants History and Characteristics Do Not Outweigh the Serious

Case: 1:12-cr-00510 Document #: 22 Filed: 10/19/12 Page 7 of 14 PageID #:317

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Dame with a degree in business administration-accountancy. He then obtained a Master of

A Sentence at the Low-End of the Guidelines Will Provide Adequate

Case: 1:12-cr-00510 Document #: 22 Filed: 10/19/12 Page 9 of 14 PageID #:319

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Policy Statements from the Sentencing Commission Favor a Sentence at

Commissions policy as to white-collar offenses such as insider trading is set forth in

Case: 1:12-cr-00510 Document #: 22 Filed: 10/19/12 Page 11 of 14 PageID #:321

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