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The U.S. Securities and Exchange Commission has brought accounting fraud charges against Miller Energy, its former CFO and former COO, tied to the alleged overstatement of assets acquired in Alaska.

In documents filed on August 6, the SEC alleged that Tennessee-based Miller Energy committed financial accounting and reporting fraud, as well as audit failures, related to the valuation of Alaskan oil and gas assets acquired in 2009.

Miller Energy purchased the assets for $2.25 million in cash along with the assumption of about $2 million in liabilities during a competitive bid in a bankruptcy proceeding.

According to the SEC, the company subsequently reported those assets at “an overstated value” of $480 million, and recognized a onetime “bargain purchase” gain of $277 million for the fiscal third quarter that ended January 2010 and the fiscal year that ended in April 2010.

The SEC claims that Paul Boyd, Miller Energy CFO at the time of the report, “failed to account for the acquisition in accordance with generally accepted accounting principles” that required Miller to record the value of the assets at “fair value.”

“However, contrary to authoritative accounting guidance, Boyd used as fair value a reserve report that was prepared by a petroleum engineer firm using the rules for supplemental oil and gas disclosures,” the SEC said.

The reserve report Boyd used also contained expense numbers that were “knowingly understated” by Miller CEO of Alaska operations David M. Hall, the SEC said.

In addition, Boyd allegedly double counted $110 million of certain fixed assets that were already included in the reserve report.

Body left Miller Energy in 2011.

The SEC also named CPA Carlton W. Vogt, III as a respondent for allegedly failing to comply with the Public Company Accounting Oversight Board rules and standards in auditing Miller Energy’s financial statements that included its accounting for its Alaska acquisition.

“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 in the filing.
For the week preceding the acquisition, Miller Energy’s stock closed at an average price of $0.66 per share.
The company’s stock traded at nearly $9 per share on the New York Stock Exchange after the acquisition and the firm saw its market capitalization climb to $393 million in 2013.

According to the Oil & Gas Financial Journal, Miller Energy CEO Carl Geisler said the company does not intend to file for bankruptcy.

“We are working to reposition an increasingly strained balance sheet. The math is stark but not damning,” Geisler told the journal.

Hall resigned from his post as COO on August 8 with immediate effect.

Miller Energy has named Leland E. Tate as its interim Chief Operating Officer.

“While the company believes the action is not warranted by the facts or the law, current management has taken the allegations seriously and is working with the company’s board of directors to effect appropriate actions,” Miller Energy said.

The SEC is looking to obtain cease and desist orders, the return of ill gotten gains and civil monetary penalties from Miller Energy, Boyd and Hall, the Oil & Gas Financial Journal noted.

The agency is also seeking to bar Hall and Boyd from service as public company directors or officers and to also bar Boyd and Vogt from pubic company accounting.