WASHINGTON - The Federal Reserve Board has fired a warning shot at the accounting profession by levying its first civil money penalty against an accounting firm.
The $5,000 fine was imposed on Dellinger & Co., a small Los Angeles accounting firm, on Sept. 14. The Fed charged that First Pacific Bancorp's 1989 financial statements, audited by Dellinger, contained "false and misleading information."
Arthur J. Dellinger Jr. agreed to settle with the Fed on behalf of the firm, without admitting or denying any allegations. Mr. Dellinger also agreed to cooperate fully in any investigation of First Pacific Bancorp, his client firm.
Signal of Professional Liability Upgrade
Although the size of the fine was small, the action signals greater scrutiny of professional liability by the Fed.
Officials at the central bank said it is devoting more attention to enforcement matters involving accountants, lawyers, appraisers, and other so-called institution-related parties.
In the 1989 thrift-bailout legislation, Congress gave regulators expanded authority to discipline professionals. The Fed disciplined discreetly, and not until this month had it gone public with a civil money penalty against accountants. The Federal Deposit Insurance Corp. and Office of Thrift Supervision have been more aggressive, seeking some penalties in the hundreds of millions of dollars.
In the First Pacific case, "the primary complaint the Fed was pursuing was the inclusion of Liberian certificates of deposit as cash items," said David L. Scott, deputy superintendent of California's banking department. "Some people had a problem with that."
First Pacific hired Dellinger & Co. after Deloitte Haskins & Sells withdrew its 1987 audit opinion and resigned in 1988.
The holding company's subsidiary, First Pacific Bank of Beverly Hills, was closed by state regulators in August 1990. Insured deposits and certain assets of the $118 million-asset institution were taken over by Commercial Center Bank of Santa Ana, Calif.