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SEC probes auditor's link to fund trustees
Potential conflicts of interest cited

By Bloomberg News | December 9, 2004

TIAA-CREF, the largest US retirement fund, said the Securities and Exchange Commission is conducting an informal inquiry into a relationship between auditor Ernst & Young LLP and two former fund trustees.
Ernst & Young, which has audited the New York-based fund for seven years, in August told TIAA-CREF of an investment it made in a business owned by William H. Waltrip and Stephen A. Ross.

The arrangement might violate federal regulations, according to an earlier fund filing with the SEC. Ernst's support of the venture ended last month when the trustees quit.

The relationship was discovered by Ernst, the third-largest US accounting firm, during an internal review that also found potential conflicts of interest with clients including Sun Microsystems Inc. and Coca-Cola Co.

In April, Ernst & Young was banned from accepting public company audit clients for six months after the SEC found it had shared revenue with PeopleSoft Inc. while auditing the company.

Waltrip and Ross owned a company that developed stock-option valuation models. Ernst invested $1.33 million in the company starting in August 2003, according to regulatory filings.

Ross, 60, a finance professor at the Massachusetts Institute of Technology, was slated to receive $335,000 from Ernst, the filing said. Waltrip, 66, the former chairman of Bausch & Lomb Inc., did not receive any payments, according to the filing.

SEC spokesman John Heine declined to comment.

''We will continue to cooperate fully with the SEC in its review of this matter," said Ernst spokesman Charles Perkins. TIAA-CREF also said it plans to cooperate with SEC staff.

The two trustees resigned ''to ensure there would be no question regarding the independence of the auditor," the retirement fund said in an earlier filing.

TIAA-CREF has more that $320 billion in assets and primarily serves teachers, university professors, and other educators.
© Copyright 2004 Globe Newspaper Company.
http://www.boston.com/business/perso...fund_trustees/