Monday, November 14, 2005
Drilling and oil exploration firm Patterson-UTI Energy, Inc., announced that an internal investigation has disclosed that upwards of $70 million may have been embezzled from the company by an officer through payment for phantom assets. According to the company's press release (here):
[A]s a result of information received by senior management of the Company on November 9, 2005, the Audit Committee of the Board of Directors of the Company has begun an investigation into unauthorized payments made by the Company for assets which were not delivered to the Company. The Audit Committee will engage legal counsel and forensic accountants to conduct the investigation. Based on preliminary findings, it appears that approximately $70 million may have been embezzled from the Company by a former officer over a period of more than five years. Because the investigation is just beginning the Company has not yet made a final determination as to the impact of these developments upon its previous financial results and assessment of internal controls.
The company issued a press release (here) just six days earlier, on Nov. 3, announcing "that John E. Vollmer, Senior Vice President-Corporate Development, has assumed the added responsibilities of Chief Financial Officer. Mr. Vollmer replaces Jonathan D. (Jody) Nelson who has resigned for personal reasons." What were the personal reasons? Nelson has not been identified as being involved in the $70 million embezzlement, but it would be difficult to siphon off that amount of money -- even in a company with over $1 billion in annual revenues -- without the infolvement of financial executives or, at a minimum, a complete breakdown in the company's internal controls. Tom Kirkendall on the Houston's Clear Thinkers blog has a detailed post (here) on the topic. (ph)