Risk & Compliance

Ex-CFO: CEO Dictated Accounting Policies

HomeGold Financial's former chief executive officer faces criminal charges in connection with the collapse of company's Carolina Investors subsidiary.
Stephen TaubFebruary 1, 2007

The former chief financial officer of HomeGold Financial, a small mortgage products company, testified Wednesday that she was wrong to use aggressive accounting procedures, according to the South Carolina Greenville News.

Karen Miller reportedly added, however, that she was simply working at the direction of her boss, former HomeGold chief executive officer Ronald J. Sheppard.

Miller gave her testimony at Sheppard’s criminal trial in Lexington, South Carolina. The former CEO faces charges of securities fraud, obtaining a signature on property by false pretense, and conspiracy in connection with the collapse of its Carolina Investors subsidiary, reported the News.

According to the paper, about 12,000 people lost an estimated $278 million when Carolina Investors, which sold notes and debentures to the public, closed in March 2003.

Miller reportedly told the court that when she became CFO, Sheppard asked her to use aggressive accounting procedures, which she did. For example, wrote the News, Miller testified that she overvalued HomeGold’s former Greenville headquarters building in Securities and Exchange Commission filings.

The former CFO also reportedly testified that when she joined the company, she discovered other questionable accounting practices, such as the transfer of assets from HomeGold to Carolina Investors without the transfer of legal title.

Asked by state Assistant Attorney General Susan Porter if she now realizes that she was wrong, the News also reported, Miller replied, “Yes.”

Miller earlier agreed to plead guilty to one felony count of conspiracy and to cooperate with prosecutors, according to the newspaper; when sentenced, she faces up to five years in prison and a fine of as much as $5,000.