Centerpoint Energy appoints new CFO

Jason Wells has been appointed the new CFO of Centerpoint Energy. He replaces Xia Liu, who bolted in May, after less than a year to become the CFO at WEC Energy. Kristie Colvin, the interim CFO, reverts to her previous role of Chief Accounting Officer.



Mr Wells joins from PG&E Corporation, the embattled California utility. He joined PG&E in 2007 and became CFO in January 2016. PG&E filed for bankruptcy in January 2019 and exited in July 2020, with a newly-reconstituted board. 11 of the 14 directors are new. The CEO, Bill Johnson, stepped down on June 30, having been in the role for only 15 months. The company had also announced plans to move its head office from San Francisco to Oakland.

Mr Wells will receive a base salary of $650,000 and a sign-on equity award of restricted stock units worth $1 million, that will fully vest in two years. The company will also buy his residence in San Francisco and pay for relocation expenses.

Centerpoint appointed Dave Lesar, the former Halliburton CEO, as its new CEO on July 1. Under pressure from activist investor, Elliott Management, the company is slimming down to become more of pure-play utility company.

SEC Filing – Centerpoint Wells appointment

 

Hospitality Group appoints new CFO

RCI Hospitality has promoted Bradley Chhay to CFO, replacing Philip Marshall, who is retiring from that role. Mr Chhay joined the company in November 2015 as Controller. He had previously worked for Live Nation and RigNet.

Mr Chhay, age 36, will have a base salary of $400,000. Mr Marshall, age 70, had been the CFO since May 2007. He will stay on at the company, focusing on income tax matters.

RCI operates adult nightclubs such as Rick’s Cabaret and restaurants and sports bars under the Bombshells brand name. It has 48 units in total, though only 34 were open at the beginning of September. The company’s head office is in NW Houston.

Like other hospitality businesses, it has been hit hard by the pandemic. Revenue for the three months to June 2020 were only a third of revenues from the comparable period, though the company states that business has somewhat recovered since. It managed to generate a positive cash flow in the quarter as a result of deferring payments that are real estate related.

Last year, the company came under fire from anonymous short sellers who alleged a series of related party transactions that were not disclosed in SEC filings. The company conducted an internal review that mostly vindicated ‘Big Rick’, the anonymous blogger. It also strengthened its related party transaction policy and vowed to appoint at least one independent director.

A formal SEC investigation into the company is still ongoing.

So, I find it amazing that the SEC filing announcing Mr Chhay’s appointment also disclosed that his brother holds a $100,000 promissory note from the company. It’s good that the company correctly disclosed it, but it shows the pervasive amount of related party transactions.

 

SEC filing – RCI Hospitality CFO appointment

CFO of publicly-traded midstream company departs

Michael Pearl, the CFO of Western Midstream Partners, will be leaving the company, although the company didn’t say when! Michael Ure, the current CEO, is taking over the CFO duties until a successor is identified.



Western Midstream is a master limited partnership that went public in 2008 as a subsidiary of Anadarko. It’s now owned by Occidental, following its takeover of Anadarko last year. It has its head office in The Woodlands.

Mr Pearl joined Anadarko in 2004. He was the CFO of the general partner of Western Midstream for two years straddling the IPO.  After that, he held senior financial roles in Anadarko until he became the CFO of Western Midstream in October 2019. His base salary was $455,000.

In August 2019, ahead of his proposed appointment, Mr Pearl entered into a retention agreement that provided for three cash payments of $261,000 each, to be paid in February 2020, August 2020 and February 2021. If he was terminated without cause, the unpaid amounts would vest. In signing the retention agreement, Mr Pearl waived his right to additional severance payments.

SEC filing – Pearl departure

 

Former CEO of Houston public company arrested for securities fraud

Jeff Hastings, the former CEO of SAExploration, has been arrested in Anchorage, Alaska on charges of wire fraud and securities fraud. He will face charges in the Southern District of New York.



SAEX is a seismic company that had significant operations in Alaska. It is based in west Houston and recently filed for Chapter 11 bankruptcy Back in February, the company restated its financial results, going back to 2014. It alleged that Hastings and former CFO Brent Whiteley misappropriated nearly $17 million between 2012 and 2019.

Whiteley hasn’t been charged with any crimes. In the FBI complaint, he is named as ‘Co-conspirator 1″. The FBI states he has ‘agreed to assist law enforcement, in part, in hopes of entering into a cooperation agreement with the Government’.

Two other co-conspirators are mentioned in the complaint, by title, though not by name. Brian Beatty, the founder and COO until December 2019, is ‘CC-2’. Michael Scott, the VP of Operations is ‘CC-3’. He resigned from his position at SAEX on September 14.

The Scheme

The complaint alleges that the scheme began in February 2015 when the CEO and CFO discussed ways for SAEX to take advantage of tax credits offered to seismic companies by the State of Alaska to help offset the costs of exploring for oil and gas in the state. The problem for Hastings and Whiteley was that the Board of SAEX was against the idea of the company operating its own data library.

In May 2015 Hastings and Whiteley set up Alaskan Seismic Ventures (ASV) as a seismic data library company that would buy seismic data from SAEX and lease it to E&P operators. However, they hid their involvement and control over ASV from the Board and investors.  To get the state credits, the company was required to conduct transactions with SAEX on an arm’s length basis.

The CEO and CFO learned that lenders were willing to make loans to ASV, if ASV was able to demonstrate it had substantial capital. $12 million of fake invoices to another company secretly controlled by Hastings allowed SAEX to send $6 million to ASV.

Unfortunately, the lenders decided not to provide funding to ASV. Hastings and Whiteley decided to send $5.8 million back to SAEX as partial payment for the seismic data it acquired.

The remaining $6 million was allegedly misappropriated by Hastings and the co-conspirators for their own personal use.

Other issues raised by the company

When the company restated its results it also said that

  • From 2012 to 2019, payments of $4.1 million were made to a company called RVI Consulting. This was secretly controlled by Mr Whiteley. The payments were originally recorded as legal and professional expenses.
  • There was a misappropriation of $0.5 million in 2013 in relation to the reimbursement of the individual tax liability of Mr Hastings.

These two items are not part of the charges brought against Mr Hastings.

HastingsComplaint

Houston woman charged with $1.9 million PPP loan fraud

Lola Shalewa Barbara Kasali, 22, of Houston, has been charged with fraudulently obtaining more than $1.9 million in Paycheck Protection Program (PPP) loans.

The complaint alleges that Kasali submitted at least two fraudulent PPP loan applications. One for an entity called Lola’s Level and the other in the name of Charm Hair Extensions. Kasali allegedly received more than $1.9 million in PPP loan funds following the approval of the Lola’s Level application.



The charges allege that after receiving the funds, Kasali transferred the money into four additional bank accounts. Authorities were later able to seize the funds, according to the charges.

The loan applications allegedly asserted both Charm Hair Extensions and Lola’s Level had numerous employees and significant payroll expenses. According to the charges, however, neither entity has employees nor pays wages consistent with the amounts claimed in the loan applications.

According to the PPP loan database of loans over $150,000 that is published by the Small Business Administration, there is one loan approved for Lola’s Level but none for Charm Hair Extensions.

The bank that approved the Lola’s Level loan was Radius Bank of Boston. That bank was also involved in partially funding the PPP loans of a Houston man now charged with buying a Lamborghini with his funds.

https://www.justice.gov/opa/pr/texas-woman-charged-fraudulently-obtaining-nearly-2-million-covid-relief-funds

Weatherford appoints new CEO

Weatherford has appointed Girish Saligram as its new CEO, effective October 12, 2020. He replaces Mark McCollum, who left abruptly in June.

Mr Saligram is currently the COO at Exterran Corporation, a Houston-based public company. Prior to joining Exterran in 2016, he spent 20 years at GE. His last role there was as General Manager, Downstream Products and Services.



Compensation package

Mr Saligram will receive;

  • a base salary of $825,000 (a $200,000 raise on his role at Exterran).
  • a long-term cash incentive award of $3.5 million that will vest over 3 years.
  • a sign-on cash bonus of $400,000
  • $400,000 in restricted stock units that will vest over 3 years
  • $400,000 in performance stock units that will vest, depending on the share price.

In the event of a termination without cause, Mr Saligram will receive severance of one times base salary and target bonus (125% of base salary). If the termination is the result of a change of control, he will receive two times base and target bonus.

Once Mr Saligram starts, Karl Blanchard, the current interim CEO, will return to his former role of COO. Keith Jennings, the new CFO, started at the beginning of September.

Post-bankruptcy woes

Weatherford filed for bankruptcy in July 2019 and emerged on December 13, 2019. Debt was reduced from $8.0 billion to $2.2 billion with the bondholders owning 94% of the equity of the newly reorganized company.

At the end of August, the company issued $500 million in new notes due 2024 at 8.75% interest. The company used those proceeds to pay off a US-based credit agreement that was only entered into in December 2019. Due to the pandemic, the company faced a declining collateral base but Wells Fargo and Deutsche Bank, the agents for the credit facility, refused to discuss any material covenant modifications.

SEC filing – Weatherford CEO appointment

Industrial blank check company completes IPO

Industrial Tech Acquisitions has completed its Initial Public Offering (IPO). It raised $75 million by offering 7.5 million units at $10 each.  The company initially filed last month and planned to raise $60 million.



Industrial Tech Acquisitions is seeking to buy a technology business operating in the industrial or energy area. This includes software, mobile and IoT (Internet of Things) applications, cloud communications and ultra-high bandwidth services. Targets would have am enterprise value of between $250 million and $500 million.

The company has its head office in the Galleria area and its CEO is Scott Crist. He has founded, run and exited a number of businesses in the technology, telecommunications and industrial sectors.

The company has 21 months from the closing of the IPO to finalize an acquisition, though that could be extended by a maximum of 9 months, if they are close to a deal.

Industrial Tech will be listed on the NASDAQ under the ticker symbol ‘ITACU’. The company joins two other Houston blank check companies that are publicly traded (Graf Industries and Landcadia Holdings II).

You can see the complete list of Houston-area public companies here

S-1 Final – Industrial Tech Acquisitions

Academy Sports + Outdoors files for IPO

Academy Sports and Outdoors has filed for an Initial Public Offering. In the filing document the company states that it plans to raise $100 million. However, this is just a placeholder. Renaissance Capital estimates that the company could raise up to $500 million.



Academy has its head office in Katy, TX. It was formed in San Antonio in 1938 when founder Max Gochman opened a tire store. The following year he started selling military surplus. The corporate office moved to Houston in 1978 and the company started selling sports and outdoor equipment in 1980. In 2011, the business was acquired by KKR, one of the largest PE firms.

The company now has 259 stores across 16 states. For the 12 months ending 1 August 2020, the business had revenues of $5.3 million. Adjusted EBITDA was $449 million. This number is before $17.6 million of costs related to the COVID-19 pandemic (primarily temporary wage premiums, cleaning supplies and accelerated freight costs).

For the 26 weeks ending Aug 2020, comparable sales are up 15.9% on the same period last year. Sales in the sports and recreation merchandise divisions are up 23%, while footwear and apparel are down 7% and 3% respectively. The company believes that the popularity of isolated recreation, outdoor and leisure activities has increased during the pandemic. Sales of firearms are also up.

The company has achieved four consecutive quarters with positive comparable sales.

Ken Hicks is the Chairman and CEO. He joined the company in May 2018 and was previously the CEO at Foot Locker. Michael Mullican has served as the CFO since January 2018. He joined Academy in February 2017 as its General Counsel. Prior to that, he was the Managing Director of Aureus Health Services, a specialty pharmacy.

No pricing terms were disclosed.

SEC filing – S-1 Academy Sports

Environmental blank check company files for IPO

Peridot Acquisition Corp is the latest Houston blank check company to file for an Initial Public Offering (IPO). The company plans to raise $300 million. It has its head office in the River Oaks area.



The company is looking to buy a business that focuses on environmentally sound infrastructure, industrial applications and disruptive technologies that eliminate or mitigate greenhouse gas emissions. The target should have an enterprise value of between $800 million and $2 billion.

Examples given include:

  • Clean fuel transportation, electrification and energy efficiency.
  • Environmental infrastructure (e.g recycling).
  • Carbon capture, utilization and storage.
  • Renewables.

Carnelian, a PE firm based in Houston, is backing the company. It has $1.8 billion in cumulative equity commitments in traditional E&P companies.

Management team

Alan Levande is the CEO of the company.  Most recently, he was the co-CEO of Covey Park Energy, a natural gas company that was sold to Comstock Resources (owned by Jerry Jones of the Dallas Cowboys) for $2.2 billion in June 2019. Prior to that, Mr Levande was a Co-Founder and Senior Managing Director at Tenaska Capital Management LLC, a $4 billion private equity manager focused on investments in the power and energy sectors, from 2003 to 2012.

Markus Specks is the CFO. He was most recently a Managing Director with Värde Partners, a global alternative investment advisor managing approximately $14 billion in assets, where he was employed from July 2008 to June 2020.

UBS Investment Bank and Barclays are the joint bookrunners on the deal.

Houston-area blank check companies

The company joins a stampede of blank check companies that have gone or are planning to go public this year. In Houston;

SEC filing – S-1 Peridot

 

Houston man sentenced to 54 months for IRS Tax Fraud Scheme

Oluwole Odunowo has been sentenced to 54 months in federal prison for his role in a nationwide conspiracy to commit mail fraud and aggravated identity theft. In May 2020, he pleaded guilty before a court in Oregon.



The IRS began investigating in May 2013, when a woman in Medford, Oregon notified the IRS that false federal and state tax returns were filed electronically. The IRS found that co-conspirators amassed a large supply of stolen U.S. taxpayer identities; obtained IRS filing PINs using victim identities; acquired prepaid debit cards in victims’ names; used fictitious email addresses; filed fraudulent tax returns and wired refund proceeds to Nigeria.

The scheme ran between 2012 and 2015 and netted co-conspirators more than $11.6 million in fraudulent tax returns. Odunowo used 700 stolen identities and filed fraudulent returns seeking over $1.5 million in refund payments. He received refunds totaling $403,000.

According to the Medford Mail Tribune, the scheme began when a Vietnamese hacker got into the databases of CICS Employment Services of Lincoln City, Oregon. He sold 91,732 identities to the ringleader, Emmanuel Kazeem of Maryland. Mr Kazeem was sentenced to 12 years in 2018. Kazeem’s younger brother, Michael, who lived in Georgia, got 7 years in November 2017. Three other Nigerians living in Georgia have also been sent to prison, along with a Wisconsin man, Curtis Pethley.

Because of security breaches tied to Kazeem’s ring, the IRS disabled its “Get Transcript” program in 2015. It was relaunched the following year, with additional security features.

https://www.justice.gov/usao-or/pr/sixth-nigerian-co-conspirator-sentenced-federal-prison-nationwide-identity-theft-and-irs