SEC Charges Quest Execs With Massive Fraud

     OKLAHOMA CITY (CN) – A federal grand jury indicted the former chief financial officer of Quest Energy Partners LP with wire fraud Wednesday, while the Securities and Exchange Commission added civil charges against the chief executive officer and the company’s chairman of the board. The SEC alleges the two men took millions from the energy company, using it as “a personal piggy bank.”

     The criminal charges were filed in Oklahoma City against David Grose, former chief financial officer, alleging an effort to defraud Quest Energy Corporation of $1 million, by manipulating an equipment order, according to the U.S. Attorney’s office.
     The alleged scheme was discovered during an investigation into the Oklahoma City-based oil and gas exploration and production company.
     The company’s former purchasing director, Brent Mueller, pleaded guilty in March to failing to report Grose’s actions and trying to cover them up. He faces up to three years in prison.
     Also on Wednesday, the Securities and Exchange Commission filed a civil complaint against Grose and the company’s former chief executive officer and board chairman, Jerry Cash, charging them with securities fraud and other securities violations for a scheme in which they allegedly misappropriated more than $12 million dollars to themselves from Quest Energy and Quest Resource Corporation.
     The commission alleges the two former executives carried out their scheme through a series of financial transfers from Quest to a company that Cash controlled, basically treating Quest “like a personal piggy bank and then [lying] about their wrongdoing to the company’s investors and auditor,” according to Rose Romero, Director of the SEC’s Fort Worth Regional Office.
     Cash “progressively” took more money over time to support his lavish lifestyle, including a $5 million mansion in Oklahoma City, the complaint alleges, while Grose was complicit in Cash’s wrongdoing by initiating the transfers to Cash’s company and creating a false cover to explain them to employees and auditors.
     The commission said the scheme began in June 2004 and collapsed in August 2008 after other Quest executives began questioning the transfers. By that time, Cash had already stolen a total of $10 million from the company.
     During the same time period, Grose was able to siphon more than $1.8 million from the company and had received approximately $850,000 in kickbacks from one of Quest’s equipment vendors over a three-year period.
     Cash resigned from the company in August 2008 and Grose was fired.

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