SEC Charges Former CEO, Firm Based On Concealed Perks
The former President and CEO of a public company repeatedly charged personal expenses to the firm largely by falsifying documents and records. Although the executive admitted certain misdeeds to internal investigators retained by the company audit committee, when confronted by the SEC during its investigation he declined to testify. The firm settled internal control and proxy violation charges. In the Matter of Polycom, Inc., Adm. Proc. File No. 3-15464 (March 31, 2015). The former CEO is did not resolve fraud and other related charges. SEC v. Miller, Civil Action No. 3:15-cv-01461 (N.D. Cal. Filed March 31, 2015).
Andrew Miller was the President and CEO of Polycom, Inc. from May 2010 to July 19, 2013 when he resigned. He was also a member of the board of directors during a portion of that period. Prior to being President he served as Executive Vice President of Sales for the company, a seller of communications technology.
Beginning in January 2010 Mr. Miller submitted, or directed others to submit, to his firm requests for reimbursement of personal expenses. The submissions falsely claimed that the charges were for business expenses. In fact the charges were for personal items. Overall Polycom paid for about $190,000 of Mr. Miller’s personal expenses. The false charges included:
- Over $80,000 for personal travel and entertainment;
- About $15,000 for clothing, accessories and spa gift cards;
- Over $10,000 for tickets to professional baseball and football games; and
- Over $5,000 for plants and related services at his apartment.
Mr. Miller used a variety of devices to conceal these charges. Some were submitted as expense reports with false business descriptions. Others were charged to a company purchasing card and backed up with false descriptions and supporting documents. Still others, such as travel, were booked by Mr. Miller without any description of the purpose for the charges. One set of charges, totaling about $65,000 for travel by Mr. Miller and a friend and girlfriend to South Africa were purportedly to conduct site inspections for the CEO Circle program, an annual incentive trip offered by the company to top-performing sales people.
To obtain these reimbursements Mr. Miller circumvented the policies and procedures as well as the internal controls of the firm with, in many instances, false documents. He also signed financial reporting questionnaires which were false because they omitted the perks. As a director Mr. Miller solicited proxies from investors for the annual meetings in 2011, 2012 and 2013 which were false and misleading. Firm proxy statements omitted many of the perks he received. In addition, he signed and certified the firm’s annual reports which incorporated by reference the false proxy statements.
In January 2012 Mr. Miller sold about 80,000 shares of Polycom stock. The shares had been issued to him as part of his compensation.
In May 2013 the firm learned that Mr. Miller had been using company funds to pay for personal expenses, concealed with false records. The Audit Committee conducted an internal investigation. Mr. Miller confirmed to the committee in an interview with outside counsel that he had charged certain personal expenses to the company, that false business descriptions had been submitted to the Polycom and admitted his conduct was inappropriate.
The complaint alleges violations of Exchange Act Section 10(b), each subsection of Securities Act Section 17(a), and Exchange Act Sections 14(a), 13(a), 13(b)(2)(A) and 13(b)(5). The case is pending. See Lit. Rel. No. 23225 (March 31, 2015).
Polycom settled the administrative proceeding, agreeing to a series of undertakings regarding its future cooperation. It also consented to the entry of a cease and desist order based on Exchange Act Sections 13(a), 13(b)(2)(A), 13(b)(2)(B) and 14(a). Polycom will pay a penalty of $750,000.