Barrett Business Services Inc. (BBSI) has agreed to pay a $1.5 million civil penalty to resolve accounting fraud allegations by the U.S. Securities and Exchange Commission.
BBSI, a publicly traded company, provides human resources and other business management services. It reported $920 million in revenue last year and profits of $25.2 million.Clients hire BBSI to process payroll and payroll taxes, to provide workers’ compensation coverage, and to perform other business administration and consulting services. It has over 50 offices in 12 states and lists 24 offices in Northern and Southern California.
According to the SEC settlement, BBSI’s former chief financial officer, James Douglas Miller hid negative trends in BBSI’s financials by concealing the company’s workers’ compensation expense and liabilities. The SEC said former controller Mark Cannon approved improper journal entries created by Miller to manipulate BBSI’s tax expenses.
Separately, Cannon agreed to pay a $20,000 penalty, the agency said.
Concurrently, federal prosecutors announced they have obtained a criminal indictment against Miller, who’s been accused of falsifying financial reports. Miller served as the CFO of BBSI from 2008 to 2016. He was fired in 2016 when he disclosed to the company that he had falsified entries in the company’s books to improperly report workers’ compensation expenses as payroll taxes and fees.
As a result of Miller’s accounting improprieties, BBSI under reported approximately $12 million in workman’s compensation expenses in 2013. At the same time as he falsified BBSI’s books and falsely certified the periodic reports filed with the U.S. Securities and Exchange Commission,
Miler allegedly profited on BBSI stock, by exercising stock options worth 35,300 shares for $467,261 and selling it for more than $2.4 million.
According to records filed in the case, on four different occasions in 2013 and 2014, Miller falsely certified periodic reports filed with the SEC. His certifications contained a number of false statements including statements that BBSI’s periodic reports fairly presented, in all material respects, the results of BBSI’s operations.
Contrary to his representations, Miller allegedly knew that during each calendar quarter of 2013, he had circumvented BBSI’s internal controls and created a number of accounting entries that improperly classified workers’ compensation expenses as payroll and payroll tax expenses in violation of generally accepted accounting procedures.
“Mr. Miller will be pleading not guilty to the charge and defending the matter vigorously,” said his lawyer, Portland attorney Janet Hoffman. Willful certification of a false periodic report is punishable by up to 20 years in prison and a fine of up to $5,000,000.