Vancouver-based Barrett Business Services disclosed late Wednesday that it has terminated Chief Financial Officer Jim Miller after learning that Miller made “unsupported journal entries” in financial records during each calendar quarter of 2013.
The disclosure triggered a sell-off of company stock, with shares closing at $24.36, a 33 percent one-day decline.
The business management services company, which has a long history of financial management turmoil, appointed Thomas Carley as interim CFO and launched a search for a new permanent CFO. Carley stepped down as chairman of the company’s audit committee to assume the interim CFO position.
Barrett disclosed that Miller informed the company board’s audit committee on March 3 of the “unsupported journal entries” that overstated direct payroll costs by approximately $1.4 million; payroll taxes and benefits expenses by approximately $9.7 million; and selling, general and administrative expenses by about $900,000. Journal entries also understated workers’ compensation expenses by approximately $12 million for the year ended Dec. 31, 2013, the company said.
The audit committee said it believes the improper journal entries had no effect on Barrett’s balance sheets, income or earnings per share for 2013 or any quarter of that year.
Barrett’s audit committee said it will launch an independent forensic accounting investigation of financial records for the five years beginning Jan. 1, 2011, as well as the first quarter of 2016. That investigation will evaluate whether other accounting irregularities occurred during those periods.
The company also said that its previously issued financial statements for the fiscal years 2012, 2013 and 2014, as well as for each quarter in those years and for the first two quarters of 2015, must be restated.
In the wake of the company’s announcement, several law firms said they would investigate possible securities law violations by the firm.
Just last month, Barrett appeared to be emerging from a controversy over its 2014 decision to establish an $80 million reserve fund to cover payments on a large volume of pending workers’ compensation claims. That disclosure, which suggested that the company had failed to establish adequate reserves in previous quarters, sent the company’s stock plummeting by nearly 60 percent and triggered a class-action lawsuit against the company.
But in February, Barrett reported that an independent investigation concluded that the company had committed “no illegal act” in financial disclosures leading up to its decision to shore up those reserves.