SEC charges former Houston Pastor with fraud

The Securities and Exchange Commission (SEC) has charged Larry Leonard II and his wife, Shuwana Leonard, with defrauding hundreds of retail investors.

Leonard is a businessman and former pastor who lives in Houston. He also owns the Houston Red Storm, a semi-pro team that’s part of the American Basketball Association (ABA).

Together with his wife, it is alleged that, between March 2017 and December 2018, the Leonards targeted investors in the African-American community with three separate fraudulent offerings. They raised $487,000 from over 500 investors.

The first offering sold bogus stock certificates in a company that bottled and sold alkaline water. The second offering was to sell a valueless cryptocurrency, that Leonard falsely claimed was backed by the water products. The last offering raised funds for a non-existent bitcoin mining investment.

Leonard told investors that the funds raised from the stock sales would be used to improve the water products and to take the company public. Instead, most of the funds raised were used to pay personal expenses of the Leonard family.

The SEC seeks permanent injunctions and disgorgement of the allegedly ill-gotten gains. It also seeks civil penalties.

https://www.sec.gov/litigation/litreleases/2020/lr24787.htm

Occidental Petroleum appoints new CFO

Robert Peterson has been appointed the new CFO of Occidental Petroleum. He replaces Cedric Burgher, who will transition to another role in the company. Mr Burgher joined the company in May 2017.

Mr Peterson joined the company in August 2014 as President of OxyChem, the chemical subsidiary of the company. Most recently he was VP of Permian Strategy. Mr Peterson holds a Bachelor’s degree in Mechanical Engineering and an MBA in Corporate Finance from the University of Florida.



Changes coming thick and fast

The changes are coming thick and fast at Oxy. It’s been barely a week since the company reached a truce with activist investor, Carl Icahn by agreeing to add three new Icahn designated directors to the Board. The company also brought back former CEO Stephen Chazen as its new Chairman.

In its proxy statement filed on April 1, the company disclosed that Oscar Brown, Senior VP Strategy, Business Development and Supply Chain, was no longer with the company. He played a substantial role in the acquisition of Anadarko. For that, he received a $1.2 million cash bonus (which was more than Mr Burgher’s bonus). The company has not filed the required 8-K with the SEC, so the terms of his departure are not known.

No compensation details were given for Mr Peterson. Last week, the company reduced the salaries for all executive officers to $250,000. Mr Burgher was making $765,000.

New severance agreements

The company also filed new severance terms for executive officers yesterday. Prior to the amendment, the company did not have formal arrangements with them. If Mr Burgher were to be let go before December 2021, severance would be 1.5 times base salary in effect on March 1, 2020 plus 1.5 times actual annual bonus. A pro-rata bonus for the year would also be paid.

Were CEO Vicki Hollub to leave, it would be 2 times base salary as of March 1, 2020 (2x $1.33 million) plus 2 times bonus.

SEC filing – Occidental CFO

Utility CFO resigns after less than a year

Xia Liu, CFO of Centerpoint Energy, has resigned to become the CFO at WEC Energy, a publicly-traded utility company based in Milwaukee. Her resignation from Centerpoint is effective immediately, though she will assist in an advisory capacity until May 1, 2020. She starts her new role at WEC on June 1, 2020



Kristie Colvin, currently the Chief Accounting Officer, has been appointed interim CFO. She has been with Centerpoint and its predecessor companies over the last 30 years.

Ms Liu joined the company in April last year. She was previously the CFO of Georgia Power Company and had spent 20 years in various roles at its parent company, Southern Co. She had a base salary of $550,000. Her new role at WEC will pay her $710,000 in base salary. Ms Liu will also receive a one-time bonus of $100,000 and a one-time restricted stock award worth $400,000.

Centerpoint is currently going through a transitional period. In February, CEO Scott Prochazka left with a $7 million cash severance and $8 million in vested stock awards. John Somerhalder, a director since 2016, was appointed interim CFO. A permanent CFO will not be named until after the appointment of a permanent CEO to replace Mr Somerhalder.

SEC filing – Centerpoint CFO resigns

Oilfield Services company replaces CFO

Nine Energy Services has appointed Guy Sirkes as its CFO, replacing Clinton Roeder, with immediate effect. Mr Sirkes joined the company in March 2019 as the VP, Strategic Development. Prior to that he was with JP Morgan’s Oil & Gas Investment Banking Group.



Mr Sirkes will have a base salary of $380,000 and be eligible for a target bonus of 80% of base salary. These are the same terms that Mr Roeder had.

Mr Roeder was appointed as CFO in December 2017, a month before Nine went public at $23 per share. He replaced Doug Aron, who became the CFO at Nine in April 2017 but left after five months for the same role at Archrock, another Houston public company. Mr Aron is still employed there.

Mr Roeder will receive a severance of $684,000. This comprises one year’s salary plus one year’s target bonus. The severance will be paid over 12 months.

Nine, which provides onshore completion and production services, has its head office in the River Oaks area of Houston. The company currently has a share price of 81 cents and a market capitalization of $23 million.

SEC filing – Nine Energy CFO appointment

CFO postpones retirement at health services company

Back in January, Larry McAfee, CFO of US Physical Therapy, announced he would retire in October 2020. He turned 65 in January. Due to the current business environment, the company has now disclosed that Mr McAfee will postpone his retirement to a later date.



The company had begun a search for his successor, but that has now been put on hold.

The company operates 583 outpatient physical therapy clinics in 40 states. It also manages 26 physical therapy practices for unrelated physician groups and hospitals. The company (market cap $824 million) has its corporate office in west Houston.

The company has been adversely impacted by COVID-19. Many of its clinics have had to close due to ‘stay in place’ restrictions. Even those that remain open have seen a significant drop in patient volume. The company is taking steps to mitigate losses, including cutting salaries for senior executives.

SEC filing – US Physical Therapy – McAfee delayed retirement

 

Houston companies reduce salaries for senior executives

In recent days, a few public companies in the Houston have announced salary reductions for senior executives as they battle with the economic downturn. The changes are temporary though most haven’t set a timetable for when they will be restored. A summary of the changes announced for the CEO and CFO officers is set out in the table below.

A shout-out to Cactus, an oilfield services company, who were the first to announce changes.

[UPDATE 4/3/2020 – Since publishing this article, other companies have implemented reductions including Stage Stores (25%), NCS Multistage (20%), Target Hospitality (20%), Flotek (10%) and Team (10%)].

A couple of other comments

Occidental : All Executives had their salaries capped at $250,000. Furthermore, it appears that Oxy cut the salaries of all US employees making over $76,000 by 30%. It appears those making less got cut by 20%. Legacy Anadarko employees appear to have only got cut 4.9% to avoid breaching contracts in last year’s disastrous merger. That’s really going to help mesh the company cultures!

Group 1 Automotive : 3,000 US employees are furloughed for a 30-day period, with an option for a second 30-day period. 2,800 UK employees are furloughed for an initial period of 21 days. That’s about 40% of their workforce.

SEC filing – Group 1 Automotive

https://www.thelayoff.com/occidental-petroleum

 

CompanyPositionNameOld salary $000New salary $000% reduction
CactusCEOScott Bender30015050%
CactusCFOStephen Tadlock33526820%
Group 1 AutomotiveCEOEarl Hesterberg1,15057550%
Group 1 AutomotiveCFOJohn Rickel63050420%
Luby'sCFOScott Gray34217150%
Nabors IndustriesCEOTony Petrello1,7501,40020%
Nabors IndustriesCFOWilliam Restrepo65052020%
Occidental PetroleumCEOVicki Hollub1,25025080%
Occidental PetroleumCFOCedric Burgher72525066%
Superior Energy ServicesCEODavid Dunlap85068020%
Superior Energy ServicesCFOWesty Ballard44037415%
US Physical TherapyCEOChris Reading80048040%
US Physical TherapyCFOLarry McAfee51033235%

CEO out at Houston retail energy company

Spark Energy stock price

Nathan Kroeker is out as the CEO of Spark Energy. He is replaced, on an interim basis, by founder and chairman, Keith Maxwell, who still owns approximately 66.5% of the stock.

The company was founded in 1999 and is headquartered in west Houston. It supplies energy to residential and commercial customers operating in 19 states.



It’s not clear what prompted the change. EBITDA rose in 2019 to $71 million and the company has net debt of only $66 million. Its share price is currently $6.20, down from $10 earlier in the year.

Mr Kroeker had been the CEO since April 2014. Prior to that. he was the CFO of Spark between 2010-2012. He had a base salary of $450,000. The SEC filing doesn’t mention any details of his severance package. However, the annual proxy for 2018, filed in April last year, stated that Mr Kroeker was entitled to severance of one year’s salary, payable in twelve monthly installments.

He will also get his 2019 earned bonus (the 2018 figure was $250,000) and a pro-rated 2020 target bonus. Mr Kroeker’s unvested stock awards will also vest. As the annual proxy statement for 2019 has not been filed, I can’t quantify their specific worth, but it is likely to be over $2 million.

Mr Maxwell will receive a salary of $1 for his interim CEO role, though he is paid $250,000 in fees for his non-Executive chairman position.

Spark appointed Jim Jones as its new CFO in June 2019. He replaced Rob Lane, who stepped down to become the CFO at Sunnova Energy, which went public in July.

SEC filing – Spark Energy CEO

Drilling Contractor CFO leaves after 3 months

Stephen Butz has resigned as CFO of Noble Corp, a drilling contractor, 3 months after joining the company. He is replaced by Richard Barker.

The company is an offshore drilling contractor. It has its registered head office in London but its operational head office is in Sugar Land.

According to the press release, Mr Butz resigned following the ‘recently announced Chief Executive Officer transition plan’.



In that plan, announced last month,  current CEO and Chairman, Julie Robertson became Executive Chairman (salary $500,000). Robert Eifler was promoted from Senior VP, Commercial to CEO (new salary $675,000). Ms Robertson also received a lump sum payment of $3.75 million, which will be clawed back if she resigns prior to October 31, 2021.

When Mr Butz joined the company in December 2019, he received a sign-on bonus of $1.1 million. If Mr Butz resigns without ‘Good Reason’ prior to December 2020, he is to repay the bonus in full. I presume that is the case here, but I can’t definitely state that as his signed employment contract has not been filed by the company. [UPDATE : The company has now the 8-K. Mr Butz gets to keep $450,000 of the $1.1 million].

In December, the company had a share price of around $1, giving it a market capitalization of $233 million and debt of $4 billion. Current share price is 29 cents (market cap $71 million).

Mr Barker joins from Moelis & Company, an investment bank. He joined that company in August 2019 having previously been at JP Morgan, Tudor Pickering Holt and Goldman Sachs. [UPDATE He will receive a base salary of $475,000. He will also receive cash retention/bonuses of $725,000 on December 31, 2020 and $575,000 on December 31, 2021].

https://www.prnewswire.com/news-releases/noble-corporation-plc-announces-departure-of-chief-financial-officer-and-names-replacement-301024738.html

Houston pipeline company to pay $60 million after California spill

Refugio State Park – USFWS Pacific Southwest Region

Plains All American has agreed to pay over $60 million in penalties and clean-up costs after a May 2015 pipeline spill west of Santa Barbara, California. The spill, which was caused by corrosion, resulted in the release of 2,934 barrels of crude oil onto Refugio State Beach and the Pacific Ocean.

Plains (market cap $4.9 billion) has its head office in downtown Houston. It has 18,000 miles of crude oil and NGL pipelines as well as 9,100 rail cars and 1,600 trucks and trailers.

The 24-inch pipeline runs from Exxon Mobil’s storage tanks in Las Flores westward to Plains’ Gaviota pumping station. Plains failed to detect the extent of the corrosion. The company was also faulted for waiting 80 minutes after the initial rupture before notifying the California authorities. In addition, Plains did not identify or account for a nearby storm drain in its emergency response plan. The crude oil that escaped flowed through the storm drain directly onto the beach.

Plains will pay

  • $24 million in penalties
  • $22.3 million in natural resource damages
  • $10 million for reimbursed natural resource damage assessment costs
  • $4.3 million for reimbursed Coast Guard clean-up costs

https://www.justice.gov/opa/pr/us-pipeline-company-modify-its-national-operations-implement-safeguards-resulting-oil-spill

Woodlands Physician group pays $1.2 million to resolve false billing claims

Millennium Physicians Association has paid the US $1,248,964 to resolve claims that they falsely billed the Medicare program for sleep studies.

Millennium is based in The Woodlands and owns and operates two sleep centers in the Houston area doing business as Millennium Respiratory & Sleep Disorder Specialists.

The investigation began following the Jan. 4, 2018, filing of a whistleblower lawsuit. Millennium employed the whistleblower who alleged the company conducted sleep studies without the presence of properly credentialed technicians.

Medicare rules and guidelines require that properly-trained and certified sleep technicians administer sleep studies. However, the investigation revealed that from Jan. 8, 2015, through March 13, 2019, Millennium improperly billed and received payment for sleep tests when they did not have the required personnel present.

Medicare rules and guidelines also require facilities to be accredited or certified by the America Academy of Sleep Medicine, Joint Commission or Accreditation Commission for Health Care Inc. Millennium self-reported that from 2011 through 2019, two of its sleep test facilities did not have such accreditation or certification.

The whistleblower will receive $187,000 as a result of the settlement.

The settlement resolved the claims without a determination of liability.

https://www.justice.gov/usao-sdtx/pr/physicians-group-pays-over-1m-resolve-false-billing-claims