Federal regulators are claiming that Polycom's former CEO used almost $200,000 in company money for personal expenses such as meals, entertainment, trips and gifts.
In addition, the Securities and Exchange Commission (SEC) charge Polycom with having inadequate internal controls and with failing to inform investors of ex-CEO Andrew Miller's personal perks. Polycom agreed to pay a $750,000 fine to settle the charges and, as part of the agreement, did not admit or deny the SEC’s charges.
The case against Miller is continuing in federal court, SEC officials said March 31.
Miller, who came to Polycom in 2009 and became president and CEO a year later, left the company in July 2013 after the discovery of what the company in a statement called "certain irregularities in Mr. Miller's expense submissions." The company in December 2013 hired ex-NCR executive Peter Leav to replace Miller.
Officials with Polycom—the second-largest video conferencing vendor behind Cisco Systems—at the time didn’t give details about those irregularities, which were uncovered by the board of directors' audit committee. They noted that Miller had accepted responsibility for them, and that they did not impact the company's financial statements. The officials also said that no other employees were involved.
However, SEC regulators outlined particulars of the allegations against Miller, saying he used hundreds of false expense reports filled with untrue business descriptions to hide how he paid for personal perks with corporate money. According to the agency, along with the meals, entertainment and gifts, Miller also used Polycom money on trips he took with his girlfriend and friends to "luxurious international resorts while falsely claiming the trips were business-related site inspections in advance of company sales retreats."
Miller did this by directing a travel agent "to bury [the costs] in fake budget line items," SEC regulators said. "In 2012 alone, Miller charged Polycom more than $115,000 in personal expenses despite publicly reporting that he received less than $35,000 in perks that year."
"CEOs are stewards of corporate assets and must be held to the highest standard of honesty and integrity," Andrew Ceresney, director of the SEC's Division of Enforcement, said in a statement. "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."
The agency outlined its findings in a complaint against Miller filed in a U.S. District Court in San Francisco, saying that the former CEO used falsified invoices or reported as legitimate business expenses more than $80,000 in personal travel and entertainment. In addition, Miller falsely reported that more than $10,000 for clothing and accessories and more than $5,000 in spa gift cards were given as gifts to customers and employees, according to the SEC.
Miller also allegedly spent more than $10,000 in corporate funds for tickets to professional baseball and football games that he claimed to have attended with clients, and more than $5,000 for plants and a plant-watering service at his apartment that he falsely said were for Polycom's San Francisco office.
The SEC is accusing Miller of violating provisions of federal securities laws that cover anti-fraud, proxy solicitation, periodic reporting, books and records, and internal controls. The agency also is claiming that he falsely certified the accuracy of Polycom’s annual reports, which included its proxy statements.
Regulators said that Miller was able to take advantage of Polycom's inadequate internal controls. As examples, the SEC noted that Miller was allowed to approve his own expenses that were charged on his assistants' credit cards, and that he was allowed to book and pay for airline flights without having to explain the purpose of the flights.
"Public companies are required to implement and maintain effective controls over executive compensation and expenses," Jina Choi, director of the SEC's San Francisco regional office, said in a statement. "Miller allegedly exploited weaknesses in Polycom's controls to steer himself a series of perks to the detriment of shareholders."