James Miller, former Chief Financial Officer of Barrett Business Services Inc. (BBSI) was indicted last week for falsely reporting workers’ compensation expenses and then profiting from these misrepresentations. BBSI provides personnel services including payroll and human resources, to companies across the country.
Miller, who served as CFO of the Vancouver, Washington-based company from 2008-2016, is alleged to have underreported BBSI’s workers’ compensation expenses to the tune of $12 million in 2013. He reported these expenses as fees and payroll taxes. Because of this, BBSI’s monetary situation appeared stronger and more attractive to investors than it actually was.
According to the Department of Justice, Miller than bought 35,300 shares in BBSI for $467,241 in order to sell them. He made a profit of almost $2 million on the sale of these shares. According to the indictment, “Miller took advantage of the decreases in payroll related costs to fund workers’ compensation obligations.”
As part of his deception, Miller reportedly ordered a staff accountant to falsify journal entries. The indictment also says that Miller fabricated documents to back up the records and had the accountant initial them. The indictment claims that Miller “circumvented BBSI’s internal controls by both caus[ing] improper journal entries to be created and then approving them.”
The indictment alleges that Miller overstated benefit expenses for the year 2013 by $9.7 million. Payroll costs and general expenses were similarly inflated, by $1.4 million and $900,000 respectively. The reports were then certified by Miller and filed the reports with the U.S. Securities and Exchange Commission (SEC).
“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,” said Erin Schneider, an associate director at the SEC regional office in San Francisco. “Investors depend on public company executives to be upfront about their company’s financial condition, no to use accounting gimmicks to hide worrisome trends.”
The SEC says Miller was attempting to hide that, relative to the company’s revenue, workers’ compensation expenses were rising. He concealed a report from an auditor showing the company needed to dramatically raise its workers’ compensation liability, to the tune of tens of millions of dollars.
Miller was fired from BBSI in 2016 when he revealed to the board what he had done. According to Emily Langlie, a public affairs officer at the U.S. Attorney’s Office, Miller voluntarily handed himself into the FBI. The crimes Miller is accused of are punishable with a fine of up to $5 million and a maximum of 20 years in prison.
A related civil case has already been settled. BBSI has agreed to pay a $1.5 million penalty but without denying or admitting to the SEC’s findings. Mark Cannon, the company’s former controller, has agreed to also pay a $20,000 penalty. Michael Elich, BBSI’s CEO has given back the $20,800 in bonuses he was awarded during the time of Miller’s actions. Elich has not been charged with any wrongdoing.
Janet Hoffman, who is representing Miller, said that he intends to plead not guilty and is planning on vigorously defending himself in court against all charges.
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