SEC Charges Former Polycom CEO With Hiding Perks From Investors
Company Settles Charges for Disclosure and Controls Failures
FOR IMMEDIATE RELEASE
Washington D.C., March 31, 2015 —
The Securities and Exchange Commission today charged the former CEO of Silicon Valley-based technology firm Polycom Inc. with using nearly $200,000 in corporate funds for personal perks that were not disclosed to investors.
The SEC alleges that Andrew Miller created hundreds of false expense reports with bogus business descriptions for his personal use of company dollars to pay for meals, entertainment, and gifts. Furthermore, he used Polycom funds to travel with his friends and girlfriend to luxurious international resorts while falsely claiming the trips were business-related site inspections in advance of company sales retreats. Miller hid the costs by directing a travel agent to bury them in fake budget line items. In 2012 alone, Miller charged Polycom for more than $115,000 in personal expenses despite publicly reporting that he received less than $35,000 in perks that year.
The SEC separately charged Polycom in an administrative order finding that the company had inadequate internal controls and failed to report Miller’s perks to investors. Polycom agreed to pay $750,000 to settle the SEC’s charges, without admitting or denying the SEC’s findings as to the company. The case against Miller continues in federal court.
“CEOs are stewards of corporate assets and must be held to the highest standard of honesty and integrity,” said Andrew J. Ceresney, Director of the SEC’s Division of Enforcement. “We will not hesitate to charge executives with fraud when they allegedly use a public company as a personal expense account and hide it from investors.”
According to the SEC’s complaint filed in the San Francisco Division of U.S. District Court for the Northern District of California, Miller’s undisclosed use of company funds for personal perks was wide-ranging:
- More than $80,000 for personal travel and entertainment that Miller hid in falsified invoices or passed off as legitimate business expenses
- More than $10,000 for clothing and accessories and more than $5,000 worth of spa gift cards that Miller falsely claimed to have given as gifts to customers and employees
- More than $10,000 for tickets to professional baseball and football games that Miller falsely claimed to have attended with clients
- More than $5,000 for plants and a plant-watering service at Miller’s apartment that he falsely claimed were for the company’s San Francisco office
The SEC’s complaint against Miller alleges that he violated the antifraud, proxy solicitation, periodic reporting, books and records and internal controls provisions of the federal securities laws. The complaint also alleges that he falsely certified the accuracy of Polycom’s annual reports, which incorporated its proxy statements.
The SEC’s order against Polycom found that its internal controls over Miller’s expenses were inadequate. For example, Polycom allowed Miller to approve his own expenses that were charged on his assistants’ credit cards, and the company allowed him to book and charge airline flights without providing any descriptions of their purpose. As a result of Miller’s misconduct, Polycom’s proxy statements contained false compensation information and failed to accurately describe Miller’s perks as required.
“Public companies are required to implement and maintain effective controls over executive compensation and expenses,” said Jina L. Choi, Director of the SEC’s San Francisco Regional Office. “Miller allegedly exploited weaknesses in Polycom’s controls to steer himself a series of perks to the detriment of shareholders.”
The SEC’s investigation was conducted by David Berman and John Roscigno of the San Francisco office, and the case was supervised by Tracy Davis. The SEC’s litigation against Miller will be led by Susan LaMarca and David Johnson.