1/29/2016Companies Fear Association With Redflex Corruption
Insurance and auditing companies distance themselves from Redflex Traffic Systems in light of red light camera corruption scandal.
Firms that do not wish to be associated with the taint of bribery and corruption are dumping Redflex Traffic Systems as clients. On Thursday, Redflex informed Australian investors that the accounting giant Ernst and Young had submitted its resignation. The photo enforcement company did its best to put a positive spin on the high-profile split.
"The board of [Redflex] has been satisfied with the services of Ernst and Young as company auditor and thanks Ernst and Young for their services over many years since the date of their appointment on 8 May 1995," Redflex told investors in a statement.
The Redflex board hired Pricewaterhouse Coopers to take over the role of auditor, at least until the company's annual meeting in November. Much more troubling for the Australian company is the angry departure of RSUI Indemnity Company. The insurance firm filed an action in Delaware Superior Court on January 14 seeking a declaratory judgment that would free the firm from liability related to the Chicago, Illinois bribery scheme.
RSUI underwrites Redflex operations, but the firm has no intention of paying the potential $383 million fine the company faces for knowingly defrauding the city of Chicago. A hearing in the city's suit against Redflex has been scheduled for February 18. Redflex has yet to respond to the charges made in the suit, which was filed on April 15, 2014. Company lawyers have done everything possible to delay proceedings.
The firm is in no hurry to defend against the suit considering a federal jury on Tuesday found ex-Chicago official John Bills guilty of taking Redflex bribes. The firm's former US head of operations, an executive vice president and its lobbyist have all admitted guilt in the ongoing scandal.
While attention has centered on the courtroom action in Chicago, Redflex and its former top employees still face charges in Columbus and Cincinnati, Ohio. In addition, federal investigators are working with admitted co-conspirators who have identified at least ten other states where bribery was used to secure lucrative contracts.
Investors have not been able to respond to the developments, as Redflex shares on the Australian Securities Exchange have not traded since January 6.