Workers Compensation PEO Known as Barrett Business Services, Inc., (BBSI) Fined Millions for Fraudulent Work Comp Reports
Here’s a story I recently read concerning a PEO (Professional Employer Organization). The story does not have a happy ending for nearly everyone involved.
A PEO known as Barrett Business Services, Inc., (BBSI) began ripping off the Work Comp system several years ago, using false financial filings to mislead the industry, regulators and investors about BBSI’s Work Comp costs and profitability. The Securities and Exchange Commission reports that BBSI was 62% — $80 million — under reserved and had to borrow to cover those reserves.
So many financial reports were falsified, BBSI was forced to restate financial results for nearly five years. The corporation did not admit or deny any of the SEC’s charges, with included alleged violations of federal securities laws covering anti-fraud, books and records, internal accounting controls and financial reporting.
The SEC indictment alleged BBSI’s former Chief Financial Officer engaged in a scheme to hide rising Work Comp costs by reporting them as payroll expenses. In it’s settlement order, the SEC noted that, by misclassifying expenses, the CFO and BBSI reported Work Comp expenses that were in line with historical trends, when in fact BBSI’s Work Comp expenses were increasing annually as a percentage of revenue. The SEC also alleged that the CFO fudged federal and state unemployment taxes.
BBSI agreed to pay a $1.5 million fine to end the investigation into its filing of false financial reports. Earlier, the corporation paid a $12 Million fine to settle a class action suit. Some officers of the corporation have been criminally charged and suspended by the SEC.
The BBSI CEO had to return substantial bonuses from the years the accounting fraud took place. A settlement with the corporation’s former controller included a monetary fine and 1-year suspension.
The investigation continues, and questions remain.