Category Archives: Uncategorized

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

 

Graf blank check company completes IPO

Graf Acquisition Corp IV has completed its $150 million initial public offering. It is a Woodlands-based Special Purpose Acquisition Company (SPAC), otherwise known as a blank check company. It’s also the first Houston-area SPAC to go public since the SEC clamped down in April. All Houston-area SPACS are restating their results.



Interestingly, Graf IV has completed its IPO before Graf Acquisition Corp II ($225 million) and Graf Acquisition Corp III ($300 million). All three companies filed their registration statements in February.

The first Graf Acquisition SPAC went public in October 2018. It took Velodyne Lidar public in September 2020. The San Jose-based company, which makes radar-like sensors used in autonomous vehicles, has had a rocky beginning as a public company.

Velodyne Lidar’s rocky road

The first quarterly results since going public underperformed analysts’ expectations. It also reported material weaknesses in revenue recognition in its first annual report. Finally, the chairman and co-founder of Velodyne Lidar, David Hall, had a spectacular falling out with Jim Graf.  The company accused Hall and his wife (who worked at the company) of behaving inappropriately regarding the Board and company processes. In turn, Hall accused the Board of prioritizing its own self-interests over that of the shareholders.

Mr Hall is no longer on the Board, though he remains the largest shareholder. However, his wife, who was fired as an employee in February, remains on the Board as does his wife’s brother. That should make for some interesting dynamics at future board meetings!

When the deal closed, the share price popped to $24.75. It’s now trading around $10.

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

https://www.businesswire.com/news/home/20210520006130/en/Graf-Acquisition-Corp.-IV-Announces-Pricing-of-150-Million-Initial-Public-Offering

 

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

Houston blank check company completes $250 million IPO

Flame Acquisition Corp has completed its Initial Public Offering (IPO) by selling 25 million units at $10 each. The company is based in downtown Houston.

The company only filed its S-1 in early February. However it confidentially filed with the SEC back in November 2020.



Flame is led by CEO and Chairman James Flores, the former CEO of Sable Permian Resources and prior to that, CEO of Plains Exploration and Production. The CFO is Gregory Patrinely, the former CFO of Sable. He also worked in the Oil and Gas division of Freeport-McMoRan, where Mr. Flores also worked for a time.

Sable Permian was formed in 2017 after it was spun off from American Energy Partners, which was formed by the late Aubrey McClendon, after he left Chesapeake. Sable filed for bankruptcy in June 2020. Mr. Flores and Mr. Patrinely left Sable days after if exited from Chapter 11 bankruptcy in February 2020.

The company is targeting opportunities in the the exploration and production and midstream sectors.

Flame has been added to the list of Houston-area public companies. There are now 8 SPAC’s or blank check companies on the list, which you can see the list here.

New CFO appointed at LNG company

Ben Atkins has submitted his resignation as the CFO of NextDecade. He has been replaced by Brent Wahl, who joined the company in June 2019 and is currently the Senior VP of Finance.

The company is based in downtown Houston and is trying to build a LNG terminal in Brownsville, Texas.  NextDecade went public in July 2017 via a reverse takeover of a blank check company.



The company has received permits from the Federal Government for the terminal but won’t start construction until it has signed long-term contracts with customers. Currently, the company has enough cash to last it through the end of this year.

So far, the company has only a 20-year contract with Shell, covering about 20% of the proposed output. Late last year, Engie, a French company, delayed making a decision on a proposed contract with NextDecade. The French government, which owns 24% of Engie, wants the Engie to source cleaner energy. The company suffered another blow last week when Ireland dropped a plan to build a terminal in Cork that would have imported LNG from the proposed Brownsville facility.

Mr. Atkins had been the CFO since November 2015. Prior to that he worked for GE Capital and McKinsey.

Before joining NextDecade, Mr. Wahl was the Head of Midstream Investment Banking for North America at Macquarie Group. He spent nine years there, working on raising finance for LNG facilities in North America.

Mr. Atkins will receive a base salary of $350,000.

SEC filing – NextDecade CFO

Houston woman charged in lottery fraud scheme

Gloria KIrk Edmonson, 75, of Houston has been charged for her involvement in a lottery fraud scheme. The case was filed in the Northern District of Alabama, where a couple of the victims lived.

She allegedly persuaded individuals, often vulnerable elderly individuals, to send money and/or valuable property via mail. The individuals were led to believe they had won the lottery and need only pay their taxes or fees to receive their winnings.



Edmonson deposited the money into bank accounts that she controlled. The funds were transferred to other accounts that her co-conspirators had access to via a debit card, which they used to withdraw cash from financial institutions in Jamaica.

The scheme ran from January 2019 to around December 2020. In February 2020, the FBI interviewed Edmonson as part of their investigation, but she alleged that she was herself a victim in the scheme.

The Victims

The location and amounts taken from the alleged victims listed in the indictment include;

  • $22,000 – Holt, FL
  • $7,000 – Jenkintown, PA
  • $10,000 – Brookhaven, GA
  • $10,000 – Normandy Park, WA
  • $7,500 – Cedartown, GA
  • $7,000 – Las Vegas, NV
  • $8,000 – Claypool, AZ

In one instance, an elderly individual from Greensprings, OH sent $500. The package was intercepted by the US Postal Inspection Service and returned to the individual. Subsequently, someone called the Sandusky County Sheriff’s Department posing as the son of the individual and requested a welfare check. Edmonson, or one of her unnamed co-conspirators, also sent a plumbing service to the victim’s home in attempt to regain contact.

Charges and Maximum sentence

A five-count indictment filed in U.S. District Court charges  Edmonson with one count of conspiracy, two counts of wire fraud, one count of mail fraud, and one count of conspiracy to commit money laundering.

The maximum penalty for conspiracy is five years in prison.  The maximum penalty for wire fraud, mail fraud, and the money laundering conspiracy is 20 years in prison.

Justice Dept – press release

Gloria Edmonson – Indictment

Chinese national indicted for theft of coiled tubing trade secrets

Lei Gai, aka Jason Gao, has been indicted for stealing coiled tubing technology from a Houston-area manufacturing company. Also indicted were two corporations, Jason Energy Technologies in Yantai, China and Jason Oil & Gas Equipment LLC (JOG), based in Houston.

Also charged in relation to the case is Robert Erford, Jr of Dayton, Texas. He previously pleaded guilty to conspiracy to commit theft of trade secrets.



Erford was a production mill operator in the Dayton plant owned by a parent company, based in Houston. The plant and the company are not named in the indictment, but I believe them to be Global Tubing LLC, which is owned by Houston-based Forum Energy Technologies.

In April 2019, Erford first contacted JOG in Houston inquiring about managerial positions. It wasn’t until September that Gao responded and they agreed to meet up in Houston the following month.

During their second meeting, Gao suggested that Erford travel to China for a two-week consultancy assignment to assist the Chinese company with its manufacturing problems. Erford was asked to bring a small piece of sample material of advanced coil tubing.

One week assignment

Erford also took 120 photos of the Dayton facility, processes and data. This included unique chemical compositions for the raw material used in the plant. Erford eventually traveled to Beijng and visited the Chinese facility for 5 days over Thanksgiving 2019. In total, Erford was paid $8,500.

The sentencing for Erford is set for March 20121. At that time, he faces a prison term of up to five years and a fine of up to $250,000.

Gao previously resided in Houston but is now believed to be in China. A warrant remains outstanding for his arrest.

Not the first time

This is not the first time a Chinese company has stolen trade secrets from a Houston-area company by targeting production employees. Back in 2017, four employees from a Trelleborg plant in North Houston were indicted, along with a Chinese national.

https://www.justice.gov/usao-sdtx/pr/chinese-energy-company-us-oil-gas-affiliate-and-chinese-national-indicted-theft-trade

 

 

 

 

Weatherford appoints new CFO

Weatherford has appointed Keith Jennings as its new CFO, replacing Christian Garcia, who resigned in June after six months.

Mr Jennings joins from Calumet Specialty Products Partners, where he was CFO. He only joined that company in October 2019. Prior to that, he was at Eastman Kodak. He also spent seven years as VP and Treasurer at Cameron International, leaving a few months after its takeover by Schlumberger.



Calumet is based in Indianapolis, so Weatherford is giving Mr Jennings a relocation allowance of $150,000. His base salary will be $500,000 and he will receive another $500,000 as a sign-on bonus. The sign-on bonus will be repayable if Mr Jennings leaves within a year.

Weatherford filed for bankruptcy in July 2019 and emerged on December 13, 2019. Debt was reduced from $8.0 billion to $2.2 billion with the bondholders owning 94% of the equity of the newly reorganized company.  Shortly after emerging from bankruptcy, the company took out a $450 million asset-based credit line.

As part of its efforts to shore up its finances, last week Weatherford secured an agreement with the noteholders that they would buy $500 million of new notes due 2024 at 8.75% interest. In return, the company would use those proceeds to pay off the credit agreement that was only entered into in December 2019.

This helps alleviate a problem facing Weatherford since the pandemic. Its international operations have proved more resilient than the domestic markets, but its borrowing base is weighted towards North America. The company faced a declining collateral base but Wells Fargo and Deutsche Bank, the agents for the credit facility, refused to discuss any material covenant modifications.

SEC filing – Weatherford CFO appointment

Flotek Industries CFO departs

Flotek Industries has announced that CFO Elizabeth Wilkinson has left the company. The company is looking for a replacement.

Flotek develops and supplies chemistry and services to the oil and gas industry. It has its head office in NW Houston. Following the sale of its non-oilfield chemicals business to Archer Daniel for $175 million in cash in January 2019, it has revenues of around $100 million.



In December 2019, the company appointed a new CEO, John Gibson who moved over from Tudor, Pickering Holt, an investment bank.

Ms Wilkinson was appointed CFO in December 2018. The short press release states that her termination was without cause. She will be paid severance according to her terms of employment with the company.

According to the annual proxy, Ms Wilkinson will receive 1.5 time base salary ($350,000) plus target annual bonus (75% of base). In total, she will receive $919,000 in severance, to be paid in nine monthly instalments.

Flotek has been in the news for three reasons recently

  • In April, the company received a $4.8 million Paycheck Protection Program loan, even though, at the end of March, it had $80 million cash on hand and no outstanding debt.
  • In May, the company acquired JP3 Measurement, a data analytics company, for $25 million in cash and 11.5 million shares.
  • The company announced it had identified two deficiencies in its internal controls over financial reporting. One relates to elimination of intercompany profits in inventory, the other relates to the intangible assets for the now-sold chemicals business. The company will be filing an amended annual report for 2019.

SEC filing – Flotek CFO departure

Houston man guilty of Hurricane Harvey fraud

Robert Kaitho, 56, has pleaded guilty to money laundering in connection with his scheme to defraud the Small Business Administration (SBA).

Kaitho applied for government assistance in reference to a property in NE Houston. Kaitho stated that the house sustained damage in Hurricane Harvey, when, in fact, it hadn’t. He falsely represented to the SBA that he would use the disbursed funds to rehabilitate the affected property.



SBA disbursed a federally-funded disaster loan to Kaitho for $71,100. He used the money to pay $25,000 to a mortgage company. Kaitho, who grew up in Kenya, also made a $30,633 wire payment to an individual located in Kenya.

Sentencing is set for June 1. At that time, Kaitho faces up to 10 years in federal prison and a $250,000 maximum possible fine.

https://www.justice.gov/usao-sdtx/pr/houstonian-convicted-scheme-linked-hurricane-harvey