(Dow Jones) The most thorough compliance programs can't provide iron-clad protection from employees who are crooks, but they can help a company remain in good standing with regulators when trouble erupts.

Insider trading charges against a former Deloitte & Touche LLC partner, who settled by paying a fine, serve as a reminder that an effective compliance program can help companies avoid penalities and damage to their reputations, even when an employee is intent on circumventing the procedures to commit wrongdoing.

The Securities and Exchange Commission alleges that Thomas P. Flanagan of Chicago, a 38-year Deloitte veteran, traded in securities owned by multiple Deloitte clients as well as shares in one company that a client had acquired. Flanagan is also accused of violating SEC rules aimed at preserving auditor independence.

Deloitte wasn't charged or even blamed for his conduct. The SEC's complaint, filed on Wednesday, instead detailed the firm's extensive procedures for making employees aware of their legal and ethical obligations, and the system it had in place for trying to detect improper securities transactions. It alleges that Flanagan circumvented those safeguards.

Accountants aren't independent from the clients they audit if, among other things, they have a direct investment in those clients. Flanagan allegedly violated that rule and insider trading laws between 2003 and 2008, when he made 71 purchases in securities of Deloitte audit clients, says the SEC. He also allegedly learned of nonpublic information, such as market-moving events and earnings results, through his Deloitte role.

Flanagan snagged more than $430,000 in profits, says the SEC. His son, Patrick, was also charged in the matter, allegedly earning more than $57,000 in profits through tips from his father.

They agreed to pay more than $1.1 million to settle the SEC's charges while neither admitted nor denied the SEC's findings. Their lawyer, Chris Gair of Chicago, declined comment.

The SEC's complaint says the elder Flanagan had acknowledged in an earlier compliance document that he was aware of the company's policy and prohibition on insider trading. He also affirmed in the company's document that he had accurately reported his securities transactions to Deloitte and didn't have a financial interest in companies in which employees cannot hold securities or accounts, which are mainly those that Deloitte advises, according to the charges.

Deloitte maintains a list of those companies, which employees are required to review before making trades to ensure they aren't engaging in a prohibited transaction. Thomas Flanagan, says the SEC, never reported his trades, or disclosed certain accounts.

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