Miller Energy, SEC settle for $5M

The U.S. Securities and Exchanges Commission has reached a settlement with Miller Energy Resources after the company inflated the value of its assets for a $5 million payment.

The settlement, reached Jan. 12, will conclude the SEC’s investigation into the oil and gas company, the parent company of Cook Inlet Energy.

The SEC charged the company, two former executives, and one of its former accountants with fraudulently inflating the values of the company’s Alaska oil and gas properties by more than $400 million.

The inflated reports began in January 2010, shortly after Miller Energy acquired a series of Alaska properties from another company, according to the settlement document. Between 2010 and the announcement of the charges in August 2015, the company’s stocks skyrocketed — from about 60 cents per share to almost $9 per share.

The company’s then-CFO, Paul W. Boyd, double-counted fixed assets, and then-CEO of Alaska operations David M. Hall knowingly understated expenses, according to the SEC’s cease-and-desist order from August 2015. An accountant from now-defunct accounting firm Sherb & Co audited the company’s reports in the year after the acquisition and failed to thoroughly investigate the financial statements, according to the cease-and-desist order.

The company bought its Alaska properties for $2.25 million in 2009 and later valued at $480 million.

“When computing their estimate of fair value, Miller Energy and the CFO failed to consider the existence of numerous, readily apparent data points strongly indicating that the assets were worth substantially less than the $480 million value Miller Energy recorded,” according to the settlement.

Boyd and Hall requested a reserves report with faulty numbers and then presented it as the total fair value of the oil and gas reserves, increasing the total value of the company on paper by $368 million, according to the settlement. They also “refashioned” an insurance study that misrepresented the value of the company’s assets, according to the settlement.

“As a result of the foregoing, Miller Energy overvalued the Alaska assets by more than $400 million,” according to the settlement.

Miller Energy has agreed to unregister all its stocks and fully cooperate with the SEC to produce documents and provide employees to testify about the violations, according to the settlement.

Miller Energy is also in the midst of a Chapter 11 bankruptcy and restructuring itself. The company announced the bankruptcy in October, blaming plummeting oil prices, a drilling plan that did not produce to expectations and the withdrawal of a private lender.

The company owes more than $180 million, as reported by the Clarion on Oct. 1, 2015.

Should the bankruptcy court accept the company’s plan for restructuring, the $5 million will become a “general unsecured claim,” essentially an IOU. The fine would then be paid “consistently with the payments made to Miller Energy’s other general unsecured creditors,” according to the SEC decision.

The federal bankruptcy court has until June 30, 2016 to decide whether to accept the bankruptcy plan, according to the settlement. If the court does not accept the bankruptcy plan, Miller Energy will have to pay the SEC in installments, completing payment by no later than 2019.

Reach Elizabeth Earl at elizabeth.earl@peninsulaclarion.com.

More in News

Rep. Ben Carpenter, R-Nikiski, right, slices and serves fresh watermelon during North Peninsula Recreation Service Area’s Family Fun in the Midnight Sun at the Nikiski Community Recreation Center in Nikiski, Alaska, on Saturday, June 15, 2024. (Jake Dye/Peninsula Clarion)
North Peninsula Rec holds annual summer celebration

Attractions at this year’s event included carnival games, food trucks, field games, face painting, live music and demonstrations

The Blood Bank of Alaska’s new Kenai Peninsula center is seen in Soldotna, Alaska, on Monday, June 17, 2024. (Jake Dye/Peninsula Clarion)
Blood Bank relaunches permanent center on Kenai Peninsula

The new location joins others in Anchorage, Fairbanks, Juneau and Wasilla

Nathan Nelson directs a kite flying dozens of feet up in the sky above Millennium Square in Kenai, Alaska, during the Kenai Kite Festival on Saturday, June 15, 2024. (Jake Dye/Peninsula Clarion)
Sun, wind, friends and kites

Kiters both experienced and novice gather for Kenai festival

Marchers walk from the Soldotna Regional Sports Complex to Soldotna Creek Park as part of Soldotna Pride in the Park on Saturday, June 3, 2023 in Soldotna, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
Pride in the Park, other Pride celebrations set for Saturday

The event starts with the Two-Spirit March, which meets at the Soldotna Regional Sports Complex at 11:30 a.m.

Signs direct visitors at Seward City Hall on Sunday, Nov. 28, 2021, in Seward, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
Seward OKs around $362,000 in purchases for Electric Department material

A pair of resolutions were included and passed within the consent agenda

Sockeye salmon are gathered together at a test site for selective harvest setnet gear in Kenai, Alaska, on Tuesday, July 25, 2023. (Jake Dye/Peninsula Clarion)
Dipnets for commercial setnet fishers given emergency approval by CFEC

Up to three 12-hour periods of commercial dipnetting “may” be allowed each week from June 20 to July 31

Council member Dave Carey speaks during a meeting of the Soldotna City Council in Soldotna, Alaska, on Wednesday, June 12, 2024. (Jake Dye/Peninsula Clarion)
Soldotna explores its water and sewer expansion fees

The fees are a single charge to people who are newly or differently demanding or utilizing the services of the city’s water and sewer system

Sockeye salmon caught in a set gillnet are dragged up onto the beach at a test site for selective harvest setnet gear in Kenai, Alaska, on Tuesday, July 25, 2023. (Jake Dye/Peninsula Clarion)
Disaster determination received for 2023 east side setnet fishery

Disasters have been recognized for 2018, 2020, 2021, 2022 and 2023

Design Project Manager Steve Noble and Public Involvement Lead Stephanie Queen appear to discuss the Sterling Safety Corridor Improvements project during a meeting of the Soldotna City Council in Soldotna, Alaska, on Wednesday, June 12, 2024. (Jake Dye/Peninsula Clarion)
Sterling Safety Corridor project to get ‘reintroduction’ at community meetings this month

The corridor begins near Whistle Hill in Soldotna and ends shortly after Swanson River Road in Sterling

Most Read