(HedgeCo.Net) The Securities and Exchange Commission has charged the former chief financial officer of Barrett Business Services Inc. for his role in an accounting fraud involving BBSI’s workers’ compensation expenses. The SEC also charged BBSI in the accounting fraud and charged the company’s former controller for his role in improperly approving certain of the CFO’s accounting entries. Both BBSI and the former controller agreed to settle the Commission’s charges against them.
The SEC’s complaint against BBSI’s former CFO James D. Miller, filed in federal district court in the Western District of Washington, alleges that Miller manipulated BBSI’s accounting records to hide the fact that its workers’ compensation expense was increasing relative to its revenue. According to the complaint, Miller took steps to conceal from BBSI’s independent auditor a third-party actuarial report concluding that BBSI needed to add tens of millions of dollars to its workers’ compensation liability. BBSI’s stock dropped 32 percent when the Vancouver, Washington-based firm announced it needed to restate its financial results to reflect increased workers’ compensation expenses.
In a parallel action, the U.S. Attorney’s Office for the Western District of Washington today announced criminal charges against Miller.
“Investors depend on public company executives to be up front about their company’s financial condition, not to use accounting gimmicks to hide worrisome trends,” said Erin E. Schneider, Associate Director of the SEC’s San Francisco Regional Office. “As alleged in our complaint, Miller betrayed the trust placed in him by the company and its investors by engaging in a number of accounting shenanigans designed to manipulate BBSI’s financial results.”
The SEC today instituted a settled administrative proceeding against BBSI for violations of the antifraud, books and records, internal accounting controls, and reporting provisions of the federal securities laws, and former Controller Mark Cannon for books and records violations. Without admitting or denying the SEC’s findings, BBSI agreed to pay a $1.5 million civil penalty and Cannon agreed to pay a $20,000 civil penalty and to be suspended from appearing and practicing before the Commission as an accountant, which includes not participating in the financial reporting or audits of public companies. The SEC’s order permits Cannon to apply for reinstatement after one year.
BBSI CEO Michael Elich, who was not charged by the SEC, has reimbursed the company for $20,800 in cash bonuses he received during the period of the alleged accounting violations.