Houston-area woman gets 25 years in healthcare fraud scheme

Brenda Rodriguez, 58, of Richmond has been ordered to prison for 25 years. She was convicted of conspiracy and aiding and abetting healthcare fraud following a three-day trial in January 2019.



Rodriguez owned and operated the QC Medical Clinic in Richmond. She paid doctors to approve patients for home health care regardless of whether it was medically necessary. Rodriguez then sold those approvals to various corrupt home health care providers. These providers then billed Medicare for services that were either unnecessary or never provided.

Ultimately, the providers billed Medicare for over $11 million as a result of patients Rodriguez provided.

Three others have pleaded guilty in this case. However, one of them,  John Ramirez, M.D was sentenced to 25 years following his conviction for his role in a $25 million medicare fraud at a different clinic in SW Houston.

Nenna Iro and Magdalene Akharamen, owners of Houston area home-health agencies, each pleaded guilty to conspiracy to commit healthcare fraud in purchasing Plans of Care and other signed medical documents from QC Medical.  Iro was sentenced to seven years, while Akharamen got three years.

 

Two local companies to restate financials as SEC bursts SPAC bubble

For the last few months, there has been a surge of blank check companies or SPACs (Special Purpose Acquisition Companies) going public. However, it has gone very quiet since early April as the Securities and Exchange Commission (SEC) has now weighed in.



On April 12, the SEC issued a staff statement that stated that some of the SPACs had accounted for warrants incorrectly in their Initial Public Offering.  They should have been accounted for as a liability, instead of equity.

Certain contracts, such as warrants, may be settled in the stock of the entity. They can be classified as equity, rather than as a liability, but it depends on the fact pattern. For instance, an equity-linked financial instrument must be indexed to the entity’s own stock in order to qualify for equity classification.

For some SPACs, the warrants included a provision that in the event of a tender or exchange offer made to and accepted by holders of more than 50% of the outstanding shares of a single class of common stock, all holders of the warrants would be entitled to receive cash for their warrants.

In other words, in the event of a qualifying cash tender offer (which could be outside the control of the entity), all warrant holders would be entitled to cash, while only certain of the holders of the underlying shares of common stock would be entitled to cash. Therefore the tender offer provision would require the warrants to be treated as a liability measured at fair value.

Local companies restating

Among a slew of SPACS that have filed that they will restate their financial statements are two Houston-area companies, Landcadia Holdings III and Genesis Park Acquisition Corp.

Landcadia III (a Tilman Fertitta SPAC) went public in October 2020, raising $500 million. In January, it agreed to take The Hillman Group in a deal valued at $2.64 billion. The company has already filed its restatement. At December 31, 2020 it increased its liabilities by $56 million. It recorded the offset as a loss (non-cash change in fair value of warrant derivative liability).

Genesis Park went public in November 2020 in an $150 million IPO. In March, it agreed to take Redwire, a space technology company, public in a $615 million deal. Genesis has not yet quantified the amount of the restatement.

SEC and Financial projections

The SEC is also weighing a crackdown on the projections made when a SPAC takes a private company public (also called a de-SPAC). In a public statement made on April 8, John Coates, the acting SEC Director, Division of Corporation Finance stated that the heightened scrutiny placed on projections in a traditional IPO should also apply to the de-SPACs. While this is not yet a public policy, it is clear where the SEC is headed.

 

 

 

Stock of Stabilis Solutions to be relisted on Nasdaq

The stock of Stabilis Solutions will once again be traded on the Nasdaq, effective April 29. It was publicly-traded for a few months in 2019.



Stabilis is a small-scale producer and distributor of Liquified Natural Gas. The company builds and operates cryogenic natural gas processing facilities, called “liquefiers”, which convert natural gas into LNG through a multiple stage cooling process. It sells the LNG to energy and industrial companies.

Stabilis Energy, as it was known then, went public in July 2019 when it completed a reverse takeover of AETI, based in Bellaire. Stabilis is owned by Casey Crenshaw, who had also been a director and shareholder of AETI since 2012. It has its head office in west Houston.

Immediately after the transaction was completed, the company received a delisting notice from Nasdaq because it neither had a minimum of 1 million publicly-held shares nor a minimum market value of $15 million for the publicly-held shares. That was due to Crenshaw owning 77% of the combined company.

As a result, the shares were suspended in October 2019 and ultimately delisted later that year. The market cap for the company (traded over-the-counter) is now around $120 million. As a result, the public float exceeds $15 million. The 25 current stockholders will be happy with this.

You can see the full list of Houston-area public companies on my website here

SEC filing – Stabilis relisting

 

CFO promoted to COO at Galveston insurance company

Tim Walsh, CFO and Treasurer of American National Group (ANAT), has been promoted to Chief Operating Officer. Brody Merrill, who joined the company in November 2020 as Deputy CFO has been promoted to the CFO position.



ANAT is an insurance company that was formed in 1905 in Galveston by William Lewis Moody Jr. and still has its headquarters there. It has a market capitalization of $3 billion. 70% of the stock is owned by the Moody Family or The Moody Foundation.

Mr. Walsh joined the company in 1995 and has been the CFO since 2017. Prior to that, he had been in charge of various divisions within ANAT. In fact, when he became CFO, he also kept his positions as Executive VP of Property and Casualty operations and multiple line agencies. In connection with his promotion, Mr. Walsh’s salary will increase from $575,000 to $650,000.

Prior to joining ANAT, Mr. Merrill spent 8 years at USAA in San Antonio. His last position was VP of Corporate Finance. Mr. Merrill’s salary will increase by $10,000 to $350,000.

SEC filing – American National Group CFO

 

Houston oil and gas investor admits to fraud

Chris Bentley, who founded Bellatorum Resources in 2016, has shut the business and admitted to fraud. Based in Spring, TX, Bentley raised about $31 million from 150 wealthy individuals to buy mineral rights in Texas shale fields.



Unusually, he sent an email on April 9 to the investors admitting to acquiring ‘bad’ and ‘non-arms length’ deals, overspending on corporate overheads and failing to hire professionals to advise him. He has turned himself into authorities, though he has not been charged with anything yet.

Bentley is a former Marine, who became a landman (someone who negotiates to acquire oil and gas or mineral leases) in 2014. Only two years later, he started his own investment fund. In all, he raised eight funds. For the last fund, Bentley aimed to raise $100 million. He admitted that he was trying to raise funds to pay distributions on his earlier funds. Instead he only raised a couple of million. Much of that money was spent on expenses.

It’s not clear whether Bentley used the funds to enrich himself. However, it appears that all the $31 million raised has been lost.

https://finance.yahoo.com/news/exclusive-texas-energy-fund-shuts-102813500.html

 

Houston real estate company to be taken over in $5.9 billion transaction

Courtesy JLL

Weingarten Realty Investors, a Houston-based real estate investment trust (REIT) has agreed to be acquired by Kimco Realty Corporation, based in New York in a transaction valued at $5.9 billion.



KImco is the number two in shopping center REITs while Weingarten is number five. Weingarten primarily operates in Texas, Florida and California. It has 159 properties where it develops and leases space in centers anchored by tenants such as Kroger and TJ Maxx.

Weingarten history

Harris Weingarten, an immigrant from Poland, first came to America in the 1880s. He started a general store in the Richmond/Rosenberg area, southwest of Houston. To grow the business, he moved to Houston in 1895 and opened his first grocery store in 1901. His son founded the real estate company in 1948 to build supermarkets for his father’s business. The grocery business grew to 103 stores before being sold to Grand Union in 1980 while the real estate business went public in 1985. Harris’ grandson, Stanford Alexander, 92, is Chairman Emeritus while great-grandson, Andrew is the Chairman and CEO.

Severance and synergies

Kimco shareholders will own approximately 71% of the combined company. The company will keep the Kimco name and its headquarters in New York. The press release stated that the business would be run by Kimco senior management. It made no mention of the Weingarten executive team.

According to the recently-filed proxy, Andrew Alexander will get approx $17 million (including vested equity) if he leaves as a result of a change in control. COO Johnny Hendrix will get about $8 million, CFO Stephen Richter over $9 million. The two Alexanders still own 6% of the equity. That means the stake is worth about $200 million.

Kimco expects to make annual savings of $35-$38 million from the combination, which it  expects to close in the second half of 2021.

SEC filing – Weingarten takeover

 

E&P company to move senior management to London as CEO steps down

Vantage Jackup rig – offshore Gabon

Cary Bounds, CEO has stepped down as CEO of Vaalco Energy. He will be replaced by non-executive director, George Maxwell, who resides in London.



Vaalco is based in the Westchase area of Houston and has a market capitalization of $130 million. Its main revenue is from offshore Gabon in West Africa. It also has an undeveloped block in offshore Equatorial Guinea. So, the CEO being based in London makes sense.

Last month, the company announced that CFO Elizabeth Prochnow would be retiring and that it would be conducting a search for her replacement. The new CFO will also be based in London. For now, it appears the head office will remain in Houston as most of the shareholders are based in the US.

Mr. Maxwell joined the Board last year. He has worked for both E&P companies with African operations (Eland Oil & Gas, Addax Petroleum) and oilfield service companies (ABB Oil & Gas). He’s also worked in Nigeria, Geneva and Houston. Mr. Maxwell will receive a base salary of $450,000.

Mr. Bounds had been CEO since December 2016. He leaves with a cash severance of $1,164,500 and $95,000 for attorney fees. He also exercised his stock appreciation rights and employee stock options, making $1.5 million in profit.

SEC filing – Vaalco CEO

Cadence Bank to merge with BancorpSouth in all-stock deal

Cadence Bancorporation, based in Houston, has agreed to an all-stock merger with BancorpSouth, based in Tupelo, Mississippi. The combined business will have a market capitalization of $6 billion.



The two banks are quite complementary is that Bancorp is a community bank, while Cadence brings commercial banking expertise. Bancorp has 325 full-service branch locations in Alabama, Arkansas, the Florida Panhandle, Louisiana, Mississippi, Missouri, Tennessee and Texas. Cadence has 98 branches in Alabama, Florida (around Tampa), Georgia (where Bancorp South has no presence), Mississippi, Tennessee, and Texas.

The two banks have contrasting histories. Bancorp was founded in 1876 in Verona, Mississippi and moved to Tupelo ten years later.  In contrast, Cadence was only formed in 2009 by banking industry veterans who helped grow Amegy Bank before it was sold to Zions Bancorporation in 2005.

The shareholders of Bancorp will get 55% of the combined equity, Cadence 45%. The company will keep the Cadence name. It will have its corporate headquarters in Houston, but its banking headquarters in Tupelo.

Dan Rollins, the CEO of Bancorp will become the Chairman and CEO, while Paul Murphy, CEO of Cadence will become Executive Vice Chairman. Mr. Rollins, before becoming CEO of Bancorp in 2012, spent 18 years in Houston as President and COO of Prosperity Bank.

Chis Bagley, COO of Bancorp will become President of the combined group. He’s also ex-Prosperity, having spent 17 years there. Valerie Toalson, the CFO of Cadence, will become the CFO of the combined group.

The deal is expected to close in the fourth quarter of 2021.

SEC filing – Cadence BanCorp merger

 

Charter School Superintendent sent to prison for embezzlement

Richard Garza, former Superintendent of Houston Gateway Academy, was sentenced to serve 60 months in prison. He pleaded guilty in September 2019 to taking $250,000.



The charter school is located in the Gulfgate area of Houston. It opened in 1999 with two classrooms. It now has about 2,300 students in three schools. Although over 90% of the students are considered economically disadvantaged, it has the highest average percentage of students meeting state standards in the Houston area.

Garza admitted he awarded a $280,000 no-bid contract in 2014 to a business owned by Ahmed Bokaiyan, an IT employee at the school. The contract was to supply IT equipment and services to a new school not yet constructed.

An audit revealed that Garza sent the business $252,757 before it completed any work. The business sent back $164,381 to Garza’s personal account. Garza used the funds to buy a Nissan Armada SUV and a condo.

Garza was ordered to pay a $20,000 fine and restitution of $191,292 to the Texas Education Agency. Bokaiyan had previously pleaded guilty and was ordered to pay $156,595 in restitution.

https://www.justice.gov/usao-sdtx/pr/former-charter-school-official-sent-prison-embezzling-funds

Woodlands real estate company appoints new CFO

The Howard Hughes Corporation has appointed Correne Loeffler as its new CFO. She replaces David O’Reilly, who was promoted to CEO in December 2020. Ms. Loeffler was previously the CFO at Whiting Petroleum, based in Denver.



Howard Hughes is now based in The Woodlands, following its move from Dallas late last year. It is primarily a developer of residential master planned communities and has market capitalization of $5.4 billion.

Ms. Loeffler will receive a base salary of $500,000 and be eligible for annual cash bonuses of $900,000 and annual long-term equity awards worth up to $1.2 million, 50% of which will vest based on performance.

Ms. Loeffler was CFO at Whiting from August 2019 to September 2020. She left as Whiting exited from bankruptcy. In Chapter 11, the bondholders exchanged $3 billion of debt for 97% of the equity in the newly-reorganized company.

Ms. Loeffler was paid handsomely for her 13 months at the company

  • Base salary of $440,000
  • Signing bonus of $190,000 in 2019
  • Cash bonus of $2.2 million paid the day before Whiting filed for bankruptcy.
  • Severance payment of $880,000
  • Transition consulting services of $68,250

Whiting also paid $158,000 in relocation costs to relocate Ms. Loeffler from Houston to Denver.

Ms. Loeffler was VP, Finance and Treasurer at Houston-based Callon Petroleum from April 2017 to July 2019. Prior to that, she spent 11 years at J.P. Morgan Securities.

Howard Hughes Corp – CFO appointment