Category Archives: Business Services

Civeo Corporation CFO leaves with immediate effect

Carolyn Stone, CFO of Civeo Corporation, has left the company with immediate effect. Barclay Brewer, the Company’s VP and Controller, has been appointed interim CFO. The company has begun a search for a permanent CFO.



Civeo, based in downtown Houston, provides temporary and long-term accommodations, primarily in the Canadian Oil Sands and Australian natural resource regions. The company has revenues of $700 million and a market capitalization of $365 million. It was spun off from Oil States International in 2014.

Ms. Stone worked as a consultant to Oil States prior to the spin off and was appointed Controller of Civeo after the company went public. She became the CFO in November 2019. Earlier in her career, she worked for PricewaterhouseCoopers, Dynegy and Synagro Technologies.

Interestingly, Civeo is one of the few public companies where the executives have employment contracts that only address severance payment terms in the event of a termination of employment following a change-of-control or due to death or disability. They do not address termination without cause and without a change-of-control.

Nevertheless, Ms. Stone has negotiated a severance package where she will receive $690,467. That seems to be approximately one year’s salary ($425,000) and target annual bonus (70% of salary). She also receives $423,650 in cash which represents the value of equity options forfeited upon termination. Finally, she will receive $20,000 to cover outplacement services.

Civeo – 8-K – Stone departure

Civeo – 8-K revised – Stone severance

 

 

Advertising firm announces CFO change

Direct Digital Holdings has announced that CFO Susan Echard has been let go. Diana Diaz has been appointed interim CFO while the Board searches for a permanent replacement.

[Update 10-16-23 Ms. Diaz has been appointed the permanent CFO with a base salary of $350,000].

Direct Digital is based in the Galleria and provides digital advertising solutions to small and middle market clients. The company went public in February 2022 through a $15 million IPO. The company now has a market capitalization of $45 million.



Ms. Echard was appointed CFO in May 2021. She had a salary of $272,500 and will receive severance equal to twelve months of base salary.

Ms. Diaz previously worked at Sharps Compliance for a total of 13 years. She was CFO for over 10 years before becoming Chief Accounting Officer. Sharps was taken private in August 2022 by Aurora Capital and Ms. Diaz left earlier this year.

Direct Digital originally went public to dig itself out of a hole caused by a disastrous acquisition in 2020. It paid $26 million for a business in Austin using a combination of equity, bridging loans at 15% interest and effectively deferred consideration. Immediately after the sale, one of the biggest customers of the acquired business took their spend in-house and revenues plunged. The company used the IPO proceeds to pay the deferred consideration to the seller and refinance some of the debt.

The company has done well to grow revenues since then and revenues are now $100 million. However, one customer accounts for over half their revenues. The company still has $25 million of debt with interest rates north of 10%.

During the course of preparing its annual report for 2022, the company found that, effective August 1, 2022, billing practices on one customer had been modified. As a result, $394,000 of invoices were not sent to the customer when they should have been. That resulted in a revision of the third quarter report for 2022 and a material weakness disclosure in the annual report. There was no word from the company whether this issue contributed to the departure of the CFO.

SEC filing – 8-K – Digital Direct CFO

Sharps Compliance to be taken private for $170 million

Sharps Compliance, a waste management company is to be taken private by Aurora Capital Partners. The PE firm offered $8.75 per share, which valued the company at $170 million.

[UPDATE 8-26 The deal is now compete]

The company handles medical, pharmaceutical and hazardous waste for small to mid-size companies such as pharmacies, dentist offices and nursing homes. The company went public in 2009 and has its head office is just south of NRG Stadium.

It grew rapidly during the pandemic, but revenues has since flattened out. Interestingly, the company has changed both its CEO and CFO this year. Patrick Malloy was appointed the new CEO in April 2022. He replaced David Tusa who had been the CEO since 2010.

In February 2022, Eric Bauer was appointed CFO, replacing Diana Diaz, who stayed with the company as Chief Accounting Officer. Prior to joining Sharps, Mr. Bauer was CFO at another Houston public company, Nuverra Environmental Solutions.

The acquisition came about after Andrew Wilson, a partner at Aurora, placed an unsolicited telephone call to Patrick Malloy, congratulating him on his appointment as the new CEO. Mr. Wilson and Mr. Malloy met a week later, at which time Mr. Wilson expressed a high level preliminary interest in acquiring the company. (Aurora already owns Curtis Bay Medical Waste Services).

Sharps had retained Raymond James in August 2021 to assist the company in seeking acquisitions and they were able to pivot quickly to negotiate with Aurora and assess the merits of the offer.

The offer price of $8.75 represents a premium of 207% over the $2.85 per share price as of July 11, the last day before the announcement of the merger. This time last year, the stock was trading between $9 and $10 per share.

SEC filing – Sharps Compliance – Aurora

Recruiter.com completes $12 million IPO

[UPDATE – The company moved its head office to New York in July 2021]

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

 

 

 

 

 

IT consulting company admits to H-1B visa fraud

Cloudgen LLC has pleaded guilty to commit H-1B visa fraud.

The company is an IT consulting firm that has its US headquarters in west Houston. However, many of its employees are based in Hyderabad, India.



;

 

Between March 2013 and December 2020, the company admitted to recruiting IT workers from India under H-1B visas. An H-1B visa is used to hire foreign workers to fill specialized jobs in the US where resident workers cannot be found. In that time, the company applied for 94 visas.

In Cloudgen’s case, the company submitted forged contracts stating 3rd parties had jobs available for individual Indian nationals. Having then obtained H-1B visas, the company would bring over the Indian nationals to the US, and start looking for other work for them.

Once Cloudgen found work for them, the company would switch the visas to the new employer. Cloudgen took a percentage of the worker’s salary as their fees. It earned approximately $493,516.28 in profits during the course of the conspiracy.

Sentencing is set for September 16. At that time, the company could have to pay up to $500,000 or the greater of twice the gross gain or twice the gross loss as well as a maximum five years of probation.

https://www.justice.gov/usao-sdtx/pr/houston-consulting-company-admits-h-1b-visa-fraud-conspiracy

 

Houston man charged in $2 million business email compromise scheme

Marvellous Eghaghe has been arrested in Houston and charged by the US District of Virgin Islands in connection with wire fraud and money laundering schemes.



According to the indictment, Eghaghe created a Texas company and an associated bank account. He used  these to obtain money fraudulently from victims in the Virgin Islands, Alabama, Texas and Columbia. He would set up email addresses very similar to legitimate vendors, thereby diverting funds to the bank account he had created.

In particular, between February 2018 and March 2018, he is alleged to have

  • diverted $109,000 of funds intended for the closing of a home in the Virgin Islands.
  • forged over $2 million of checks from a business in Alabama.
  • diverted $48,000 of funds from a business in Texas.
  • diverted $35,000 from a business in Columbia.

Eghaghe appeared to have three co-conspirators, who were not named in his indictment. For the three smaller amounts, Eghaghe diverted most of the funds to himself and his co-conspirators. The indictment also alleges that $25,000 of the $2 million was transferred to a personal account. However, it’s not clear what happened to the rest of the money.

 

https://www.justice.gov/usao-vi/pr/houston-man-arrested-international-money-laundering-conspiracy-stretching-us-virgin

Aviation services blank check company completes IPO

Genesis Park Acquisition Corp, a Houston-based blank check company, has completed its initial public offering. It raised $150 million by offering 15 million units at $10 each. The company had originally planned to raise $200 million.



The company is led by chairman David Siegel, who is also Executive Chairman of an ultra-low-cost airline carrier, Sun Country Airlines. Together with CEO Paul Hobby (the Founding Partner of PE firm Genesis Park LP), they are seeking a business in the aviation sector with an enterprise value of between $500 million and $1 billion.  The CFO is Jonathan Baliff, former CFO and CEO at Bristow.

The company will be listed on the NYSE. It is the sixth Houston-area blank check company to list this year You can see the complete list of public companies in the Houston-area here.

https://www.prnewswire.com/news-releases/genesis-park-acquisition-corp-announces-pricing-of-150-million-initial-public-offering-301179336.html

Katy man pleads guilty to stealing $2 million from employer

[UPDATE 02.04.21 Bishop was sentenced to 41 months].

Andy Bishop, 45, of Katy, has pleaded guilty to stealing more than $2 million from his employer, Independent Professional Management (IPM), a staffing and asset management company, based in west Houston.



The company started in 1992 and Bishop joined in 1998. According to the company’s website ‘Andy Bishop joined the team, not knowing he would eventually become the Super Star operations guru that everyone relies on to keep things running on a daily basis.’ His title was VP of Resource Management.

As stated in the criminal charges, Bishop was in charge of preparing the ‘Borrowing Base Report’ to Gulf Coast Bank. This was used to fund the operations of the company. In the example in the charge sheet, Bishop stated that IBM had $3,888,237 in accounts receivables, when in fact the company only had $2,822,065 in receivables. That allowed IPM to borrow more money than the company was truly entitled to.

According to the press release from the US Attorney’s Office, Bishop created fake vendor accounts and diverted the ‘excess’ cash to pay these vendors.  Over a span of six years, Bishop stole approximately $2.1 million. These details are not included in the criminal charges filed.

The owners of the company discovered the fraud in August 2019.

Bishop will face sentencing on Jan 5, 2021. At that time, he faces up to 20 years in federal prison and a possible $250,000 maximum fine.

Last week, in another case involving a trusted, long-standing employee, James Camp was sentenced to four years for stealing $10 million over a 19-year period from Lubrizol in Deer Park.

https://www.justice.gov/usao-sdtx/pr/ex-oil-exec-admits-stealing-more-2-million

Robert Andrew Bishop – charges

[Note that the press release issued by the US Attorney’s Office incorrectly refers to the employer as International Professional Management].

Houston man sentenced to two years for role in email fraud scheme

Joshua Ikejimba has pleaded guilty to conspiring to commit wire fraud. He was sentenced to two years in prison in the Southern District of New York.



Mr Ikejimba, who had many aliases, was part of a wide-ranging, international business email compromise scheme that ran from 2016 to July 2018. He was indicted in May 2019, along with another Houston man, Chinedu Ironuah and two Atlanta men. Mr Ironuah remains at large, while proceeding continue against the other two.

Mr Ikejimba obtained fraudulent passports in false names. He also registered shell companies and opened fake bank accounts at various banks throughout the US. Companies were tricked by fake emails and fraudulent wiring instructions into sending funds to bank accounts controlled by the syndicate. Mr Ikejimba laundered the funds at various check cashing facilities in Houston.

The defendants obtained approximately $8 million in this way. Mr Ikejimba was personally responsible for laundering $1.25 million in fraud proceeds.

Victims listed in the original indictment included

  • Intergovernmental organization in New York ($188,815)
  • Foreign-based healthcare company ($41,495)
  • Foreign-based manufacturing company ($123,895)

In addition to the 24-month prison term, Mr Ikejimba was sentenced to three years of supervised release. He was further ordered to forfeit $1,250,766.03, and to pay restitution to his victims in the amount of $1,238,748.93.

https://www.justice.gov/usao-sdny/pr/texas-man-sentenced-two-years-prison-participation-multimillion-dollar-business-email

 

 

Houston man charged with spending COVID relief funds on Lamborghini

[UPDATE 11-29-21 – Mr. Price pleaded guilty in September 2021 and was sentenced to 110 months in prison.]

Lee Price III, who lives in NW Houston, has been charged with fraudulently obtaining more than $1.6 million in Paycheck Protection Program (PPP) loans. He allegedly spent the money on having a good time, including $233,337.60 on a 2019 Lamborghini Urus.

In case you are thinking that you read about this case last week, no, that was a Florida man who used his PPP funds to buy a $318,000 Lamborghini Huracan.



According to the criminal complaint, Price has a felony conviction for forgery (2010) and for robbery (2010). He is also currently a defendant in Harris County, where he is charged with the felony offense of tampering with a government record.

Price purported to be an executive of Price Enterprise Holdings, Price Logistics Services and 713 Construction LLC. Although these entities exist, they have never filed with the Texas Workforce Commission. That means they have not hired employees or paid unemployment taxes.

PPP applications

Price made six applications for PPP funds. However only two were funded, namely;

  • $937,500 by Radius Bank, Boston
  • $752,452 by Harvest Small Business Finance in California.

For the loan financed by Harvest, Price filled out the forms using the name of an elderly man who had died a month before. On this application, Price had an unnamed co-conspirator, who received $250,000 of the funds received.

Wine, women and song (…and an office lease)

According to the complaint, the day he received the funds from Radius, Price bought a $14,000 Rolex watch. The day after, he bought the Lamborghini. The following days saw him spent $700 at a liquor store, $2,000 at a strip club and $2,500 at two Houston night clubs. Later Price paid $100,000 as a deposit on a property in north Houston. He also spent $108,000 on a lease of new business office space (!) in Memorial City.

For the funds received from Harvest, the complaint alleges Price bought a 2020 Ford F-350 for $85,000 and leased a luxury apartment in midtown Houston. $85,000 was also withdrawn in cash.

Price is charged with making false statements to a financial institution, wire fraud, bank fraud and engaging in unlawful monetary transactions.

Price becomes the third Houston-area man to be charged with fraud in connection with PPP loans. A Funeral Director was charged in June. A 29-year old man (same age as Price) was charged in July.

https://www.justice.gov/usao-sdtx/pr/houston-entrepreneur-charged-spending-covid-relief-funds-improper-expenses-including