SEC bars Houston investment advisor after guilty plea

The Securities and Exchange Commission has barred Bill Hightower from association with any broker or investment advisor. This follows Mr Hightower’s guilty plea in a federal court in October 2019.

Mr Hightower had been indicted in October 2018 on 13 counts for running a $10 million Ponzi scheme between 2013 and 2018. Mr Hightower, who lives in Bellaire, was the President of Hightower Capital Group, which he founded in 2010. He worked as a broker for UBS Financial Services between 2007 and 2013 and Legacy Asset Securities between 2013 and 2015.

Just before his trial was due to start in October 2019, he pleaded guilty to two counts. One for transferring $900,000 from a trust for an elderly investor and using that money to pay back other investors and fund his personal lifestyle. For the second count, he admitted to selling $800,000 worth of ExxonMobil shares without the investor’s permission. Again he used the money to pay back other investors and fund his personal lifestyle.

As part of the plea agreement, Mr Hightower agreed that investors lost $9.5 million. He also agreed to pay back whatever amount the Court decides as restitution. He is scheduled to be sentenced in July. Mr Hightower could face up to 20 years in prison.

In a separate case, in September 2019, the Financial Industry Regulatory Authority (FINRA) ordered UBS to pay $555,000 to an 90-year old woman who claims she was defrauded by Mr Hightower. At that time, he was a broker for UBS.

https://www.sec.gov/litigation/admin/2020/34-88941.pdf

 

Oilfield Services merger falls apart

Photo by Joshua Doubek

Superior Energy Services has announced that the merger of its US completions business with Forbes Energy Services is off.

The deal was originally announced in December 2019. The plan was to combine the entities in an all-stock transaction and then spin it off into a publicly-traded company. At the time of the merger announcement the Newco was projected to have proforma revenues of $831 million and adjusted EBITDA of $77 million.

Refinancing as part of the merger

Superior said that the rapidly declining demand for oilfield services made it impractical to complete this transaction. In addition the transaction was also dependent on refinancing $500 million of Superior’s debt that is due in 2021. The downturn made that more difficult.

The original agreement stated that Superior would pay a $5 million break-up fee to Forbes in the event the merger didn’t happen. The agreement has been revised so that there will be no break-up paid by either side.

Delisting notice

Superior’s stock price is trading at 99 cents. On March 30, the company received a non-compliance notice from the NYSE because its market capitalization and stockholders’ equity were both below $50 million. Normally the company would have six months to regain compliance. However, due to the volatility in the financial markets caused by COVID-19, the NYSE is permitting 18 month cure period.

Ransomware attack

Adding to the problems that the company faced, on April 28, the company announced it would have to delay filing its quarterly report for Q1 (originally due by May 11). The company said this was due to disruptions caused by COVID-19 which resulted in stay home orders and office closures.

The company finally filed its 10-Q on May 21. In the filing it disclosed, that on March 31, 2020, it had been subject to a ransomware attack that temporarily disrupted access to some systems.

Superior 10-Q filing

 

ConocoPhillips CFO to retire after 39 years at the company

Don Wallette, the CFO of ConocoPhillips, is retiring effective August 31, 2020. He will be replaced by Bill Bullock, currently the President, Asia Pacific and Middle East.

Mr Wallette retires after 39 years with the company. He joined Phillips Petroleum in 1981 as a staff drilling engineer in Houston. He was appointed to the CFO position in February 2016 after stints in Russia and as President, Asia Pacific.

The company has the second-largest market capitalization of a Houston-area company ($46 billion), behind only Crown Castle. And Mr Wallette is the only the CFO of a Houston-area public company with a base salary of over $1 million.

Mr Wallette has a defined benefits retirement plan worth $2.6 million. He also has a Key Employee Supplemental Retirement Plan that was worth $23.6 million at December 31, 2019. The Supplemental Plan will be paid out as a lump sum cash payment six months after Mr Wallette retires.

In his current role Mr Bullock has a base salary of $717,000. He joined ConocoPhillips in 1986 and has had spells in many different parts of the company. Like Mr Wallette, he has a bachelor’s degree in Chemical Engineering (from Texas A&M). Mr Bullock also has a Master’s degree in business administration with an emphasis in finance from Oklahoma City University.

SEC filing – ConocoPhillips CFO

Trading on Houston biopharma companies halted over COVID-19 claims

[UPDATE 5-28-2020: After both companies issued similar press releases on May 27, laying out more specifically the timeline for the drug to get approval, trading in both companies has resumed on 28 May].

The Nasdaq has halted trading on CNS Pharmaceuticals and Moleculin Biotech pending further information from the companies related to a drug candidate for the coronavirus illness COVID-19.

Moleculin Biotech is based in the Rice Military area of Houston and went public in June 2016. CNS is based in the Galleria and completed its IPO in November 2019.

The Securities and Exchange commission temporarily halted trading on May 5 of the two companies.  That temporary halt was due to expire on May 15, until the Nasdaq stepped in. The SEC also halted trading of Vancouver-based WPD Pharmaceuticals, which is traded on the Canadian Stock Exchange. However, WPD will resume trading on the CSE.

University of Frankfurt research

The saga began on March 11 when independent researchers at the University of Frankfurt posted a paper on a website, for peer review. The research found that 2-deoxy-D-glucose (“2-DG”) was able to reduce replication of SARS-CoV-2, the virus that causes COVID-19, by 100% in in vitro testing.

Three companies linked by common shareholder

On March 23, 2020 CNS announced that it had entered into an agreement with WPD for the development of several preclinical drug candidates, including WP1122. The founder and largest shareholder of CNS, Dr Waldemar Priebe, is also the founder and largest shareholder of WPD too.

WPD had previously licensed rights to a portfolio of drug candidates, including WP1122, from Moleculin Biotech for certain regions. Dr Priebe is one of the largest shareholders of Moleculin. He is also the chair of the Scientific Advisory Board of that company.

By day, Dr Priebe is also the Professor of Medicinal Chemistry, Department of Experimental Therapeutics at MD Anderson Cancer Center.

CNS states that WP1122 is a biologically inactive compound that can be metabolized in the body, to produce a form of 2-DG. The March 23 press release stated that WP1122 was being tested for a range of viruses, including SARS-CoV-2.

On April 8, Moleculin issued a press release touting the Frankfurt research. CNS issued its version of the press release on April 13.

Market capitalization rockets

Prior to the March 23 announcement, CNS had a market cap of $24 million. After the April 13 press release, it was $60 million. Likewise for Moleculin Biotech, the market cap rocketed from $24 million to $89 million.

The SEC is concerned that CNS and certain unnamed third parties may have overstated the status of development of WP1122, the status of testing the drug’s impact on COVID-19 and the ability to expedite regulatory approval of any such treatment.

https://www.globenewswire.com/news-release/2020/05/18/2034963/0/en/Nasdaq-Halts-CNS-Pharmaceuticals-Inc.html

Dril-Quip promotes from within for CFO position

Dril-Quip has promoted Raj Kumar, currently VP Finance and Chief Accounting Officer, to be the Chief Financial Officer. Jeffrey Bird, who was Senior VP of Production Operations and CFO, has been promoted to Chief Operating Officer.



Dril-Quip is based in NW Houston and manufactures and services offshore drilling and production equipment. It currently has a market capitalization of $889 million. The company has always been conservatively run and has $344 million of cash on the balance sheet and no debt.

Mr Bird joined Dril-Quip as its CFO in March 2017. He joined from another oilfield services company, Frank’s International. Mr Kumar also worked with Mr Bird at Frank’s between March 2015 and May 2017.

Mr Kumar’s base salary increased from $300,000 to $350,000. There was no change to Mr Bird’s salary ($680,000). Both men were given new restricted stock awards that vest over three years (50% is performance-based).

The previous COO of Dril-Quip was James Gariepy who left with a $1.1 million cash severance in March 2019.

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

 

Dril-Quip – Kumar promotion to CFO

 

 

Missouri City Physician to pay $450,000 to resolve fraud allegations

Dr Maaz Abbasi has agreed to pay $450,000 to resolve allegations that he falsely signed home help certifications and plans of care in exchange for money. He also agreed to a three-year exclusion from participation in any federal healthcare program.

Dr Abbasi was connected with Egondu ‘Kate’ Koko. In May 2019, she was sentenced to over 15 years in prison for her role in a $20 million medicare fraud. She owned a number of home health agencies. She admitted to paying illegal kickbacks and bribes to physicians and patients for paperwork necessary for the agencies to bill Medicare.

From 2015 to 2018, Abbasi certified patients for home health services without any knowledge of their medical condition or homebound status. One of the companies owned by Ms Koko paid Abbasi approximately $6,200 in exchange for signing these fraudulent Medicare home health certifications and plans of care. Abbasi also fraudulently signed a fellow physician’s name on these certifications and plans of care without that physician’s authorization, permission or knowledge.

The agreement resolves the allegations without a determination of liability.

https://www.justice.gov/usao-sdtx/pr/missouri-city-physician-pays-nearly-half-million-resolve-illegal-kickback-and-fraud

Houston biotech start-up files for IPO

Kiromic Biopharma has filed for an Initial Public Offering (IPO). It plans to raise $20 million. The company is based in the Medical Center district. It was formed in 2006, though it had minimal operations until 2012.

The company is developing immunotherapies for blood cancers and solid tumors. It will use artificial intelligence and its proprietary neural network platform to identify new surface tumor targets. These targets can then be used to create therapies such as antibody therapies, T cell therapies and vaccine therapies. The company has three early-stage product candidates.

The CEO is Maurizio Chiriva Internati. He has been in that role since February 2018, though he joined the company in 2012. He has been an Associate Professor at MD Andersen Cancer Center since August 2019.

Tony Tontat is the CFO and COO. He joined the company, initially as a consultant, in April 2018. He has helped raise funds for biotech public companies such as Sorrento Therapeutics and NantKwest.

The company plans to list on the NYSE American under the symbol ‘KRBP’. No pricing terms were disclosed.

SEC filing – Kiromic Biopharma S-1

 

 

CFO leaves as Houston retailer files for bankruptcy

Stage Stores has filed for Chapter 11 bankruptcy. It will simultaneously solicit bids for a going concern basis and initiate an orderly wind-down of operations.



CFO Jason Curtis is leaving the company to take a position with another retailer, effective May 22, 2020. CEO Michael Glazer will oversee the finance function. The company has also retained Rick Stasyszen to assist Mr Glazer. He previously served as the company’s Senior VP, Finance and Controller until May 2019.

The company operates 738 stores in 42 states. Historically, the company operated department stores under the names of Bealls, Goody’s, Palais Royal and Peebles. It was in the process of converting all its stores to the Gordman’s off-price brand.

All its stores closed on March 27, 2020 due to COVID-19. The company anticipates that approximately 557 stores will open on May 15. A second phase of approximately 67 stores will open on May 28 with the balance on June 4.

The company has been struggling for a few years. It last made an operating profit in 2015 and the coronavirus was the last straw.

As of February 2019, the company had 13,600 full-time and part-time employees.

https://www.businesswire.com/news/home/20200510005033/en/

Texas City man admits to $5 million health care fraud

Ravinder Syal, 57, of Texas City, has admitted to a nearly $5 million fraud in a Corpus Christi federal court.



Between February 2018 and March 2020, he acquired several physician practices in Harris County, Galveston County and Corpus Christi. He handled the administrative functions of the practices including staffing and billing. In each case, he switched the practices to electronic billing and hired an outside billing service, located in India, to handle patient billing.

The Defendant conspired with the outside billing firm to fraudulently bill Medicare, Medicaid, and several private health insurers. He billed for tests and services that were not rendered by a physician or performed during a patient visit.

Syal acted without the knowledge or assistance of the physicians. According to the charge sheet, this included his wife, who is a pediatrician!

He fraudulently billed services amounting to almost $4.9 million. Syal was paid $553,069 as a result of these claims.

Sentencing has been set for August 10. At that time, Syal faces up to 10 years in federal prison and a possible $250,000 maximum fine.

https://www.justice.gov/usao-sdtx/pr/texas-man-admits-role-nearly-5-million-health-care-fraud-scheme

 

Former Oilfield Services CFO leaves with a $6 million cash payment

Greg Powell, Chief Integration Officer with Nextier Oilfield Services, will be leaving the company in May. Mr Powell was the CFO of Keane Group, prior to its all stock merger with C&J Services in October 2019.



Under the terms of the merger, Mr Powell was to leave at the earlier of (i) 18 months or (ii) the date at which the company achieves $100 million in annualized savings. He will receive a performance bonus of $2.6 million.

Mr Powell will also receive a cash severance payment of $3 million, to be paid over the next two years. In addition he will also get a pro-rated cash bonus for 2020 of approximately $300,000. Just over 200,000 restricted stock units will also vest. At the current share price of $2.40, these are worth $0.5 million.

Mr Powell spent 10 years in various divisions of General Electric. He then joined PE firm Cerebus Capital Management before coming the CFO at Keane Group, a portfolio company, in March 2011.

Annualized savings

At the time the deal was announced, the target cost savings were $100 million. This was soon increased to $125 million. On the Q4 2019 earnings call held on March 11, Mr Powell stated that $3 million of savings were achieved in Q4 2019, $20 million would be achieved in the first half of 2020 and $63 million in the second half of 2020.

Declining Market capitalization

Keane went public in early 2017 with a market capitalization of $2 billion. It announced its merger with C&J Services in June 2019 (combined market cap $1.5 billion). By the time the deal closed in October, the combined market cap had fallen to $1 billion. It’s now just over $500 million.

CFO of Nextier got $4.1m severance 

At the time of the merger, Jans Kees van Gaalen, the CFO of C&J, became the CFO of the combined group. He left in December 2019, just 15 months after joining C&J, with a cash severance of $4.1 million.

Kenny Puchei, the former VP of Finance for Keane, was appointed as the new CFO.

The remaining executive officers are reducing salaries by 20% for 2020 due to the uncertainties caused by COVID-19.

SEC filings – Powell departure