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Accounting Giant To Pay $4 Million After Improper Lobbying

The accounting firm of Ernst & Young has agreed to pay $4 million to settle civil charges that it violated federal rules when a subsidiary lobbied Congress on behalf of audit clients.

"Ernst & Young engaged in lobbying activities that constituted improper advocacy and clearly violated the rules," said Scott W. Friestad, associate director of enforcement for the Securities and Exchange Commission, which announced the penalty Monday.

Accounting firms are not supposed to lobby on behalf of their audit clients because that violates their independence. The SEC says the company is settling the case without agreeing to or denying the charges.

Among other violations noted by the agency, Washington Council EY, an Ernst & Young subsidiary, sent letters signed by a senior executive of an Ernst & Young client to congressional staff urging passage of legislation and also marked up a draft of a bill, including a client's language, which it sent to congressional staff.

Ernst & Young has issued a statement noting that the company voluntarily ceased lobbying for audit clients in 2012.

"Auditor independence is of paramount importance to EY," the statement notes. "We regret these instances that arose many years ago and are pleased to put this matter behind us."

Two years ago, Reuters reported that Amgen Inc., CVS Caremark Corp. and Verizon Communications Inc., among other companies, had lobbying contracts with WCEY, while also using Ernst & Young to review their corporate books.

Earlier today, we reported that Citigroup agreed to pay $7 billion to settle a federal investigation into subprime mortgages it sold in the run-up to the financial meltdown of 2008.

Note: This post has been updated with a response from Ernst & Young.

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Alan Greenblatt has been covering politics and government in Washington and around the country for 20 years. He came to NPR as a digital reporter in 2010, writing about a wide range of topics, including elections, housing economics, natural disasters and same-sex marriage.