The former chief financial officer of Vancouver-based Barrett Business Services was indicted Wednesday and accused of misrepresenting millions of dollars in filings with the U.S. Securities and Exchange Commission, then personally profiting from those misstatements.
James Miller of Washougal served as CFO of the publicly traded business management company from 2008 to 2016, when he was fired after admitting that he had falsified entries in Barrett’s books to improperly report workers’ compensation expenses as payroll taxes and fees.
In 2013, Miller allegedly underreported about $12 million in workers’ compensation expenses. As a result, the company’s balance sheet looked more robust to its investors and stock analysts. Barrett trades on the Nasdaq Exchange under the symbol BBSI.
According to a media release from the U.S. Department of Justice, Miller then profited by exercising his stock options. He bought 35,300 shares for $467,261 and sold them for more than $2.4 million.
“Miller took advantage of the decreases in payroll-related costs to fund workers’ compensation obligations that were reflected on BBSI’s balance sheet,” states Miller’s indictment, prepared for U.S. District Court for the Western District of Washington.
“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 Schneider, associate director of the SEC’s San Francisco Regional Office, in a Thursday media release. “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.”
According to the indictment, Miller violated the company’s internal controls by directing a staff accountant to make incorrect journal entries. Miller then allegedly created backup documents for the falsified records, and instructed the accountant to initial them before he signed off on them as CFO.
“Miller thereby circumvented BBSI’s internal controls by both causing the improper journal entries to be created and then approving the journal entries,” the indictment states.
By the end of 2013, Miller had reportedly overstated payroll costs by $1.4 million, payroll taxes and benefit expenses by $9.7 million, and general expenses by $900,000.
He then reportedly went on to certify the period reports the company made with the SEC until March 2014, despite tampering with the initial filings.
Miller turned himself into the FBI voluntarily, said Emily Langlie, public affairs officer for the U.S. Attorney’s Office. It’s unlikely the state will ask a judge to jail Miller during the court proceedings, Langlie added.
He appeared in U.S. District Court in Tacoma on Thursday afternoon. His alleged crimes are punishable by up to 20 years in prison and a $5 million fine.
The case is being investigated by the FBI and is being prosecuted by Assistant U.S. Attorneys Justin Arnold and Francis Franze-Nakamura.
Civil case settled
Also Thursday, the company agreed to settle BBSI’s civil case with the SEC (separate from Miller’s criminal case) for $1.5 million. The company’s former controller, Mark Cannon, will also pay $20,000 and is suspended from appearing and practicing before the commission as an accountant for at least one year.
A spokeswoman for BBSI did not return a request for comment by press time. The settlement had been announced with last month’s quarterly earning report, at which time investors punished the stock, sending it down 23 percent the next day.
Barrett Chief Executive Officer 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.
Founded in 1951, Barrett Business Services has 50 offices across the country. It provides support and personnel services to businesses, including consulting on issues like human resources, payroll, and compliance.
BBSI’s shares closed at $63.73 Thursday, up 88 cents.
