Wednesday, November 16, 2005

SEC Sues Former Patterson-UTI CFO for Embezzlement

Patterson-UTI Energy, Inc., the drilling rig company, announced earlier that an internal investigation had uncovered an embezzlement of up to $70 million from the company through bogus asset purchases.  The company's CFO, Jody Nelson, had resigned just a week before that announcement for "personal reasons," which triggered all sorts of speculation about his involvement in the siphoning of company funds.  The SEC has now identified Nelson as the person responsible for the embezzlement in filing an emergency freeze action in the U.S. District Court for the Northern District of Texas (Lubbock).  According to the Commission Litigation Release (here):

[T]he SEC alleged that Nelson, who resides in Dallas, Texas, orchestrated a massive phony-invoice scheme to embezzle more than $69 million from Patterson-UTI over five years. The SEC also named as relief defendants five Nelson-controlled companies alleged to have received proceeds from the scheme: XIT Land & Energy, Inc. ("XIT"), Chisum Travel Center, Ltd., Z8 Properties, Ltd., Three Stars Aviation, LLC, and Chisum Coach, Ltd.

The SEC's complaint alleges that Nelson created false invoices that caused Patterson-UTI to pay millions of dollars to XIT, a company he secretly controlled that was not a legitimate Patterson-UTI vendor. To accomplish his scheme, Nelson circumvented Patterson-UTI internal controls by, among other things, forging another company official's initials on payment documents. According to the complaint, Nelson finally confessed to Patterson-UTI on November 9 that he embezzled approximately $29 million, but company records show that he actually stole $69,434,342 from January 2001 through October 2005. To hide his scheme, Nelson, among other things, made false written representations to Patterson-UTI's independent auditor about the accuracy of the company's financial statements and signed false public certifications attesting to the truthfulness of the company's quarterly and annual SEC reports.

No word yet on a criminal charge, but the outline of the claims in the SEC complaint makes a prosecution almost inevitable, and the question is whether Nelson is cooperating with the U.S. Attorney's Office in its investigation. (ph)

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Comments

It don't seam posible for this to be pulled off by only one man someone had to at least suspect wrong doing and opt to turn there head in fear of there job or they were sucked into the vacume that is created by such an undertaking.Witch ever it is, as an employee of the company it will be interesting to see how those people are delt with I take great pride in representing Patterson UTI Drilling and hope to have a great future with the company.Being able to take a 70,000,000.$ hit and suvive is a possitive in more ways than one it says a great deal about the people that have to try and exsplain to there employee's and investors how a thing like this could happen.I guess we are all victoms of temtation and greed to an exstent this man needs our prayers in getting through this because I'm sure he's got a family maybe kids that had nothing to do with this but will certanly be affected by the outcome of it all.

Posted by: e Elton Williams | Feb 21, 2007 6:46:09 AM

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