TULSA, Okla. (CN) – Pricewaterhouse Coopers “blessed” bogus financial statements that helped hide the CEO’s raiding of the company’s coffers for “self-dealing and speculative trading” that ultimately sunk SemGroup, the bankrupt Oklahoma energy firm’s court-appointed trustee claims in Tulsa County Court.
Bettina M. Whyte, trustee for the SemGroup Litigation trust, calls the accounting giant’s alleged negligence “one of the most egregious instances of auditor malpractice in Oklahoma history.”
She says Pricewaterhouse helped hide CEO Tom Kivisto’s use of SemGroup’s money for personal trades on oil and other energy commodities, which ultimately added up to an “unpayable debt … of approximately $290 million.”
These and other reckless trades led to the sudden and unexpected collapse of the firm — once considered one of the nation’s fastest growing privately held companies — in July 2008, the lawsuit states.
“Rather than sounding alarm bells, Pricewaterhouse issued unqualified opinions in support of the company’s financial statements year after year,” Whyte claims.
Had Pricewaterhouse, which served as SemGroup’s outside auditor from 2004 to 2008, “conducted audits according to even the minimal standards of care, Kivisto’s self-dealing and speculative trading would have been revealed, and the devastating financial consequences of each have been avoided,” the lawsuit states.
Founded by Kivisto, Gregory Wallace and Kevin Foxx, SemGroup grew into a front-line buyer, storage provider and transporter of oil, gas and asphalt. At its peak, the company had revenues approaching $15 billion, according to published reports.
At the time of its collapse, these same reports said, the firm had lost at least $2.4 billion on failed position in the oil futures market and owed another $3.5 billion to various creditors.
White describes the failed position as separate from the $290 million hole Kivisto left in the company’s books, which he allegedly “gamble[d] away … on unauthorized, highly speculative oil futures.”
According to Tulsa World, SemGroup CEO Terry Ronan told employees in a March memo that SemGroup could emerge from Chapter 11 as a public company focused on its core SemCrude oil segment.
New York billionaire John Catsimatidis also has expressed interest in taking the company out of Chapter 11, although he is in a legal battle with Ronan and other company executives over who controls SemGroup’s fate.
Whyte seeks compensatory and punitive damages on claims of professional negligence, violation of the Oklahoma Accountancy Act and breach of fiduciary duty.
The trust is represented by lead attorney Oliver S. Howard of GableGotwals in Tulsa.