Signaling that it is closely scrutinizing the expenses of senior executives and the internal controls of public companies, the Securities and Exchange Commission charged former Polycom CEO Andrew M. Miller this week with using approximately $190,000 in corporate funds for personal expenses and falsifying business records to hide this scheme from investors.  The SEC alleged in its civil complaint that Miller submitted, or directed his administrative assistants to submit on his behalf, requests for reimbursement for personal expenses with fabricated business descriptions to conceal the true nature of the expenses.

The alleged personal expenses were wide-ranging, including meals with friends, weekend getaways, limousine rides for his girlfriend, hotel and spa gift certificates, clothing and accessories, and baseball and theater tickets.  In addition to submitting false expense reports, the SEC alleged that Miller misused Polycom’s sales incentive program for additional personal travel and perks, including a trip to Bali.

According to the complaint, Polycom learned of Miller’s alleged conduct in May 2013.  Following an internal investigation, Polycom’s Audit Committee confronted Miller with specific examples of personal expenses that he had submitted with false descriptions.  He subsequently tendered his resignation and Polycom publicly announced in July 2013 that the company had found irregularities in his expense submissions.

Miller was charged with violating the antifraud, proxy solicitation, periodic reporting, books and records, and internal controls provisions of the federal securities laws and with falsely certifying the accuracy of Polycom’s annual reports, which incorporated its proxy statements.

In a separate administrative order, the SEC charged Polycom with having inadequate internal accounting controls—by, for example, allowing Miller to approve company purchasing card charges incurred by administrative assistants, even if they were incurred on his behalf—and failing to report Miller’s perks to investors.  The company agreed to pay $750,000 to settle the charges without admitting or denying the SEC’s findings.

In the press release announcing the charges, Andrew J. Ceresney, Director of the SEC’s Division of Enforcement, said that “CEOs are stewards of corporate assets and must be held to the highest standard of honesty and integrity” and that the SEC “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.”  Of the charges against Polycom, Jina L. Choi, Director of the SEC’s San Francisco Regional Office, added that “[p]ublic companies are required to implement and maintain effective controls over executive compensation and expenses” and that “Miller allegedly exploited weaknesses in Polycom’s controls to steer himself a series of perks to the detriment of shareholders.”

For more information, here are the SEC’s press release, complaint, and administrative order.