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Sunday, April 12, 2015

SEC CHARGES FORMER TECH CEO WITH USING CORPORATE FUNDS FOR PERSONAL PURPOSES WITHOUT DISCLOSURE TO INVESTORS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 
Litigation Release No. 23225 / March 31, 2015
Accounting and Auditing Enforcement Release No. AAER-3646 / March 31, 2015
Securities and Exchange Commission v. Andrew M. Miller, Civil Action No. 3:15-cv-1461

The Securities and Exchange Commission 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.

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.

The SEC's complaint against Miller alleges that he violated Section 17(a) of the Securities Act of 1933 ("Securities Act") and Sections 10(b), 13(b)(5) and 14(a) of the Securities and Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 13a-14, 13b2-1, 14a-3 and 14a-9 thereunder, and aided and abetted violations of Sections 13(a), 13(b)(2)(A) and 14(a) of the Exchange Act, and Rules 12b-20, 13a-1, 14a-3 and 14a-9 thereunder.

The SEC's order against Polycom found that it violated Sections 13(a), 13(b)(2)(A), 13(b)(2)(B) and 14(a) of the Exchange Act and Rules 12b-20, 13a-1, 14a-3 and 14a-9 thereunder.

The SEC's investigation was conducted by David Berman and John Roscigno of the San Francisco office, and was supervised by Tracy Davis. The SEC's litigation against Miller will be led by Susan LaMarca and David Johnson.

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