VTR Ventas Inc

Ernst & Young LLP agreed Monday to pay $9.3 million to settle two separate cases in which regulators said the accounting firm's independence was compromised by close personal relationships between its auditors and executives of its audit clients.

The Securities and Exchange Commission said E&Y misrepresented in audit reports that it was independent in its dealings with the clients, and that it didn't do enough to prevent its audit partners from getting too close to the clients. Audit firms are required to maintain arm's-length relationships with their clients in order to preserve their ability to stay objective and conduct tough, impartial audits.

Ernst & Young settled with the SEC without admitting or denying the commission's findings. The firm said in a statement that auditor independence "is of paramount importance" to it. The auditors in question violated E&Y's policies, "betrayed the trust placed in them" and are no longer with the firm, E&Y said.

In one case, the SEC said, E&Y partner Pamela Hartford had a romantic relationship with Robert Brehl, then chief accounting officer of real-estate investment trust Ventas Inc., while she served on the E&Y team auditing Ventas. Ventas isn't identified in the SEC complaint, but Ventas said in 2014 that Mr. Brehl had left the company because of "an inappropriate personal relationship" with an E&Y partner.

In the other case, the SEC said Gregory Bednar, an E&Y partner tasked with improving E&Y's relationship with a "troubled account," had a friendship with the client's chief financial officer that including staying overnight at each other's homes, traveling together with family members on personal trips, and treating the CFO's son to sporting events and other gifts.

Ms. Hartford, Mr. Brehl and Mr. Bednar also settled with the SEC without admitting or denying the commission's findings.

Write to Michael Rapoport at Michael.Rapoport@wsj.com

(END) Dow Jones Newswires

September 19, 2016 12:05 ET (16:05 GMT)

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