There is a criminal investigation into the process that Sealed Air followed in selecting Ernst & Young (EY) as its external auditor. Senior executives at Sealed Air allegedly favored EY by leaking details of competitor KPMG’s bid.The same two executives worked together at Carlisle Cos ten years earlier when EY got that audit contract. Sealed Air has fired one of the senior executives as well as EY.
The bidding process issues arose as the SEC has been looking into Sealed Air’s accounting practices. The agency’s questions focus on write-offs related to asbestos claims. In investigating the accounting issue, the SEC ran across the e-mails that piqued interest in the bidding process.
Years ago, post-Enron, the audit selection process was placed in the hands of the board’s independent audit committee. Management “collusion” (air quotes here in a tip of the hat to the word of our times) was headed off at the pass, we thought.
The Barometer thought that bid-rigging was a thing of the past. A number of professional organizations have codes of ethics that prohibit even the slightest communication between purchasers and vendors during the bid process. Purchasing professionals frown upon saying to vendors something as generic as, “You are going to have to get your price down.” In fact, the foundation for these rules is no ex parte contact. If there are questions, distribute the question and answer to everyone. If there is confusion, clarify for everyone. What a stunning series of events! What a sad commentary on yet another of the Big 4 accounting firms.