Regulation

Ex-Miller Energy CFO Accused of Accounting Fraud

The company overstated the value of oil and gas assets in Alaska by $400 million in regulatory filings.
Matthew HellerAugust 6, 2015
Ex-Miller Energy CFO Accused of Accounting Fraud

Former Miller Energy Resources CFO Paul W. Boyd inflated the value of oil and gas assets in Alaska by more than $400 million, helping to transform a penny-stock company into one with a market cap of $393 million, the U.S. Securities and Exchange Commission alleged Thursday.

Miller acquired the assets for $2.25 million in cash in a December 2009 bankruptcy proceeding but subsequently reported them in a regulatory filing at an overstated value of $480 million, the SEC said in an enforcement action that names the company and three individuals — Boyd, Chief Operating Officer David M. Hall, and former independent auditor Carlton W. Vogt III — as defendants.

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fraudAccording to the SEC, Boyd relied on a reserve report that did not reflect fair value for the assets and double-counted $110 million of fixed assets included in the report.

“The Alaska acquisition was the single most important event in Miller Energy’s nearly forty-year history, transforming it from a company long mired in the penny-stock arena to one traded on a national exchange,” the SEC said.

For the week preceding the acquisition, Miller Energy’s stock closed at an average price of $0.66 per share. Since the acquisition, the SEC said, the company has raised tens of millions of dollars in debt and equity, listed its stock on the New York Stock Exchange, and had its stock trade at nearly $9 per share.

The stock ($MILL) was down more than 21% at 13 cents in trading Thursday, continuing a slide that began last week when Miller disclosed it was facing a host of financial problems.

Boyd served as Miller’s CFO and treasurer from 2008 to 2011 and as director of risk management from 2011 to 2014. According to the SEC, he initially overstated the value of the Alaska assets in a Form 10-Q filed in March 2010, also reporting an after-tax $277 million “bargain purchase gain” that boosted net income for the quarter to $272 million – compared with a $556,097 loss for the same period the year before.

Vogt, who was then at Sherb & Co. LLP, allegedly failed to comply with professional standards in auditing financial statements that included the overvaluation of the Alaska assets.