Katy woman pleads guilty to defrauding BP of $2.3 million

A Katy woman, Angelica Garcia-Dunn, has pleaded guilty to defrauding BP.  Ms. Garcia-Dunn was the founder and CEO of Aim Global Logistics, a freight forwarding and logistics company.



She contracted with BP to act as an escrow agent in which she would make payments on BP’s behalf to BP’s railcar lessors and repair vendors. Between July 2018 and September 2019, BP made payments totaling $2,282,148.53 that Ms. Garcia-Dunn was supposed to use to pay the BP vendors. Instead she diverted the money to either pay other business obligations or to her own personal account.

Most of the money diverted was used to pay business creditors. However, Ms. Garcia-Dunn transferred at least $80,000 to her personal bank account.

The scheme went undetected for so long because Ms. Garcia-Dunn used later payments from BP to pay earlier vendor invoices that had not been paid due to the misappropriation of BP funds. As an accounting fraud, this is known as  ‘Teeming and Lading’.

Sentencing is set for September 30. At that time, Ms. Garcia-Dunn faces up to 20 years in prison and a possible $250,000 maximum fine. She will remain on bond pending that hearing.

https://www.justice.gov/usao-sdtx/pr/katy-resident-admits-fraud

 

ExxonMobil appoints outsider as its new CFO

ExxonMobil has appointed Kathryn Mikells as its new CFO. She replaces Andrew Swiger, who has been the CFO since 2013. Mr Swiger is retiring in September after a 43-year career with the company. Exxon has a mandatory retirement age of 65.



The company has its corporate office in Irving, TX , though it has a large presence in Houston. It is unusual for Exxon to appoint an outsider for a senior executive position but it has been under pressure from activist shareholders recently (more on that below). Ms. Mikells is the first woman appointed to the Executive leadership team at Exxon.

Ms. Mikells has a diverse background. For the past four plus years, she has been based in London as the CFO of Diageo PLC, the drinks manufacturer. Ms. Mikells announced her resignation in January as she planned to return to the US.

Prior to that, she was CFO at Xerox (2013-2015), ADT (2012-2013) and Nalco, a chemicals company (2010-2011).  She worked at United Airlines in Chicago for 16 years, where she ended up as CFO. When United merged with Houston-based Continental Airlines in 2010 she lost out on the CFO position of the combined group to Continental CFO Zane Rowe.

Ms. Mikells will receive a base salary of $1.1 million.

Activist Investor

In June, an activist investor, Engine No 1, won three seats on the Board of Exxon, despite the objections of the company and its CEO, Darren Woods. The hedge fund, which only owns 0.02% of Exxon’s stock, argued that the company did not have a coherent plan for a transition to cleaner energy sources. It also argued that the company was too insular and needed outside perspectives. Other investors backed the hedge fund, mainly because Exxon’s recent financial performance has been shocking.

Poor financial performance

In the first decade of this century, Exxon had around $20 billion of net cash and was making a return on capital in excess of 25% a year. Now, net debt is nearly $50 billion and returns have fallen below 5%. As an example, the $41 billion acquisition of XTO Energy, a natural gas producer, in early 2010 was overpriced and ill-timed (the CEO at the time was Rex Tillerson).

Back in June, a report in Bloomberg stated that Exxon planned to reduce its headcount in the US offices by 5-10% annually for the next three to five years.

SEC filing – ExxonMobil CFO appointment

 

 

 

 

Southwestern Energy appoints new CFO

Southwestern Energy, based in Spring, has appointed Carl Giesler as its new CFO. He replaces Julian Bott, who died suddenly in January 2021. Michael Hancock, who has been interim CFO, will continue as VP – Finance and Treasurer.



Southwestern has a market capitalization of $3.7 billion. It is primarily a natural gas producer that has all its operations in Pennsylvania, Ohio and West Virginia. However, in June, it announced a deal to acquire Indigo Natural Resources for $2.7 billion. Indigo is a natural gas producer with operations in the Haynesville Basin in Louisiana.

Mr. Giesler joins from SandRidge Energy, where he had been CEO since April 2020. Co-incidentally, Mr. Bott was CFO at SandRidge prior to joining Southwestern.

Mr. Giesler was CEO of Jones Energy (from July 2018 to January 2020) and Miller Energy Resources (from September 2014 to July 2018). Both Jones and Miller Energy filed for bankruptcy during Mr. Giesler’s tenure. SandRidge is publicly-traded but has been struggling for a number of years. So, Mr. Giesler’s roles as CEO have all had a very heavy financial focus.

Mr. Giesler will receive a base salary of $525,000 and a one-time cash signing-on bonus of $500,000, to be paid on the one year anniversary of his employment.

SEC filing – Southwestern CFO appointment

Good Works management team completes its second SPAC IPO

Good Works II Acquisition Corp, a Houston-based SPAC or blank check company, has completed its $200 million Initial Public Offering. It priced 20 million units at $10 each. The company will  trade on the Nasdaq.



The Company’s management team consists of Messrs. Fred Zeidman, Chairman, Douglas Wurth, Chief Executive Officer, and Cary Grossman, President. It’s the same team that completed a $150 million IPO in October 2020 for Good Works Acquisition Corp.

In March 2021, Good Works I announced it would take Cipher Mining Technologies, a bitcoin miner, public. It is still in the process of trying to close that deal, which has an enterprise value of $2 billion. Good Works I looked at a nanotechnology company and a genomic diagnostic lab before deciding on Cipher.

As with Good Works I, three officers have agreed to make available 750,000 founder shares (3% of the initial allotment) to be contributed to non-profit organizations, including those involved in the arts, human rights and the advancement of life sciences. These shares will be donated within six months of the IPO closing.

With Good Works I, it was Zeidman, Wurth and David Pauker, a non-exec director, who donated shares. This time it is Zeidman, Wurth and Grossman.

S-1 filing – Good Works II Acquisition Corp

Patterson-UTI to acquire smaller rival for $295 million

Allan D. Hasty

Patterson-UTI Energy, a drilling rig contractor based in NW Houston, has agreed to acquire smaller rival, Pioneer Energy Services, based in San Antonio for $295 million. This includes the retirement of all the $200 million debt of Pioneer. $30 million will be paid in cash, the rest in stock.



Pioneer exited bankruptcy in May 2020, having converted $267 million of debt into equity.  Loomis, Sayles & Co, an investment management firm, ended up owning 44% of Pioneer. BlackRock owns 20% of Pioneer (and 15% of Patterson-UTI).

Patterson-UTI is buying 17 rigs in the USA and 8 that operate in Columbia. 16 of those rigs are super-spec rigs, adding to the 150 that Patterson-UTI already has. This will give Patterson a market share of around 30% for super-spec rigs, behind market leader, Helmerich & Payne (around 37%).

Pioneer’s drilling rigs account for about 60% of its revenue ($34 million out of $59 million for the 1st quarter of 2021). The rest of Pioneer’s revenue in the quarter came from Well Servicing ($14 million) and Wireline Services ($10 million).  Patterson has said it will divest of the Well Servicing business after the deal closes, expected in the 4th quarter of 2021.

https://patenergy.com/investors/news/press-release-details/2021/Patterson-UTI-Energy-Announces-Agreement-to-Acquire-Pioneer-Energy-Services/default.aspx

 

Recruiter.com completes $12 million IPO

Recruiter.com Group has completing its initial public offering (IPO). It sold 2.4 million units at $5 per unit, giving it a market capitalization of $29 million.

The company has its head office just west of downtown Houston. It operates an online platform that connects small and independent recruiters and employers.



Recruiter.com was formed in 2010 by Miles Jennings, who is now the COO. Mr Jennings has worked in recruiting and online recruiting since 2003. He previously worked at Adecco and Indeed,com and is based in Connecticut.

The company is led by CEO Evan Sohn, based in New York. He has considerable experience in online payment systems. CFO Judy Krandel is also based in New York and joined the company in June 2020. She was previously the CFO at a company that provided chat and messaging technologies for social media networks.

In March 2019, Recruiter.com acquired the customer lists of Genesys Talent for $8.6 million in stock. Genesys, now called Opptly, is based in Houston and provides client-matching software for recruiters and employers. Recruiter.com agreed to license the client-matching software from Genesys until March 2021.

At the same time as the Genesys acquisition, the company completed a reverse takeover of a shell company that was trading over-the-counter.

The company has made a number of acquisitions this year;

  • Scouted in January for $1.8 million. The business will help expand its video hiring solutions.
  • Upsider in March for $3.9 million. The company will use Upsider’s machine learning artificial intelligence to assist in developing its recruiting tools.
  • OneWire in May for $1.3 million. The company has an expansive candidate database in financial services.

For 2020, the business had revenues of $8.5 million and an adjusted EBITDA loss of $2.8 million. It used $2.5 million cash in operations in 2020 but only had $0.1 million on hand at the end of the year. Not surprisingly, the filing statement states there is substantial doubt that the company will continue as a going concern.

The company will receive $8.8 million, net of expenses, and will use the money for working capital, sales and marketing, R&D and funding for growth strategies.

S-1 filing – Recruiter.com

 

 

 

 

 

Foster Wheeler agrees to pay $177 million to resolve Brazil bribery allegations

Foster Wheeler, now part of the Wood Group, has agreed to pay $177 million to resolve criminal charges stemming from a scheme to pay bribes to officials of Petrobras in exchange for a $190 million contract to design a gas-to-chemicals complex.



The scheme occurred in 2012. At the time, Foster Wheeler was an independent company with its headquarters in Switzerland. In 2014 Amec acquired the company for £1.9 billion. The combined company was later acquired by UK-based John Wood Group plc in 2017 for £2.2 billion. All three companies had large presences in the Houston area.

The Scheme

In 2011 Foster Wheeler hired a Country Manager for Brazil to identify opportunities in the country. The Country Manager reported to the Houston office.

Later that year, an Italian agent learned from a Brazilian agent (an ex-Petrobras employee) that Petrobras were seeking bids on the design of a gas-to-chemical fertilizer plant. Both the Italian agent and the then-Chairman of Foster Wheeler were regular customers of a high-end men’s clothing store in New York. The Store sales manager introduced the two. After the meeting, the chairman forwarded details to the acting CEO, without vouching for the legitimacy of the agent.

In turn, the CEO forwarded the information to the Brazil Country Manager, who responded that the company should not use the Italian agent as ‘we would send a wrong message in the market here’.

The Italian agent was affiliated with a Unaoil, a Monaco company heavily involved in bribery. See my blog post from October 2019 here. When Foster Wheeler did its due diligence on Unaoil, they declined to use it because of its possible violations of US and UK sanctions laws. Despite that, the CEO and COO offered the agent a 2% commission.

Foster Wheeler later agreed a 2% commission with the Brazilian agent. As a result, the company won the front-end engineering and design contract in late 2012. In total, Foster Wheeler ended up paying over $1.1 million in bribes.

In 2014, Petrobras elected not to proceed with the construction phase of the project.

The Settlement

Wood Group issued a press release stating it will pay $177 million over the next three years to resolve all allegations. This covers payments to the UK, US, and Brazil, though the company did not disclose the exact split.

Foster Wheeler is paying the Department of Justice $18.4 million. It is also paying the SEC $22.7 million for FCPA and book-keeping violations (if you are going to bribe someone, you must record it as a bribe). Both will be reduced by penalties paid to Brazil and the UK. The US will receive a net number of $17.8 million.

https://www.woodplc.com/news/latest-press-releases/2021/wood-reaches-resolution-on-legacy-investigations

https://www.justice.gov/opa/pr/amec-foster-wheeler-energy-limited-agrees-pay-over-18-million-resolve-charges-related-bribery

https://www.sec.gov/news/press-release/2021-112

Houston E&P company appoints London-based CFO

Vaalco Energy has appointed Ron Bain as its new CFO. He replaces Elizabeth Prochnow who retired in March.

Vaalco is based in the Westchase area of Houston and has a market capitalization of $182 million. Its main revenue is from offshore Gabon in West Africa. It also has an undeveloped block in offshore Equatorial Guinea.

Mr Bain will be based out of the London office. He was previously the CFO at Eland Oil & Gas Plc where he worked alongside CEO George Maxwell, who was appointed in April. Eland was an E&P company primarily focused on Nigeria.

Mr Bain previously worked for Baker Hughes and led the financial integration planning for the merger of Baker Hughes and GE Oil and Gas. Prior to that he was the regional accounting director for Europe, Africa and Russia for Baker Hughes.

Mr Bain will receive a base salary of $330,000.

SEC filing – Vaalco appoints Bain as CFO

Luby’s sells most of its operations

SBG San Antonio

Luby’s has announced that it will sell most of its operations in two separate transactions. The company has been struggling for years and, in November 2020, it agreed to liquidate its assets and dissolve the company.



Prior to the decision to liquidate, the company had 61 Luby’s branded restaurants (mostly in Texas), 24 Fuddruckers restaurants that were owned and 71 that were franchised. However, a number of the Luby’s had closed due to the pandemic.

The company also operates culinary contract services that offered on-site food services for healthcare facilities, colleges and sports stadiums. It also made sales through retail grocery outlets.

32 of the Luby’s restaurants and the brand name will be sold to a newly-formed affiliate of Calvin Gin. Approximately 1,000 workers at those restaurants will be offered positions by the buyer. Mr. Gin is part of the family that established the Flying Food Group, the third largest airline catering company in North America. The business also provides food preparation services for Starbucks.

The buyer is not paying paying any cash for the business but assuming operating liabilities and giving Luby’s a loan note. Luby’s anticipates the total value to be $28.7 million. The real estate for 25 of the 32 locations is owned by Luby’s. This is not part of the transaction and will be auctioned off by the company separately.

The Fuddruckers franchise is being sold to Nicholas Perkins, a Washington, DC-based entrepreneur for an estimated $18.5 million. Again, the payment is in the form of assumed operating liabilities and a loan note. Mr. Perkins previously acquired most of the company-owned Fuddruckers restaurants.

Once these transactions are completed, Luby’s will be left with a handful of company-owned Fuddruckers, the culinary contract service business and the retail sales.

However the main value will be derived from the sale of real estate which comprise most of the liquidation net asset value of $117 million. The company currently has 63 properties in total. The share price is $3.85, giving it a market capitalization equal to its liquidation value.

SEC filing – Luby’s sale

SEC filing – Fuddruckers sale

Energy broker pleads guilty to insider trading scheme

Mathew Webb, of Tiki Island (near Galveston) has pleaded guilty for his role in an insider trading and kickback scheme. Back in February, I wrote about energy trader John Ed James who pleaded guilty for his role in the same scheme.

Webb paid kickbacks to James and co-conspirator Marcus Schultz (who pleaded guilty in July 2020) using commission fees paid by Schultz’s employer, Shell.



Instead of trading futures contracts openly and competitively, Schultz disclosed to James and Webb material non-public information that he would be willing to accept on behalf of Shell. Webb would arrange offsetting trades with James and another unnamed co-conspirator. The group would net the difference between the price of these trades and the price that would have been obtained in arms-length transactions. Illicit gains totaling $966,403 were split among the group. Webb received $585,000.

The scheme ran from 2013 to 2016.

In June 2019, the National Futures Association suspended Webb through January 2022 and fined his company $200,000. They found that Webb “failed to uphold high standards of commercial honor and just and equitable principles of trade.”

The hearing panel also found that the company failed to maintain adequate and complete records. The panel had heard evidence that three years’ worth of telephone recordings were missing due to a malfunction. Mary Webb, the wife of Mathew, was the Associated Person for the business (someone who is meant to ensure the business follows the rules of the regulatory bodies).

Webb is scheduled to be sentenced in September. Schultz and James also awaiting sentencing.

https://www.justice.gov/opa/pr/former-energy-broker-pleads-guilty-insider-trading-and-kickback-scheme