dollar fraud case emerges
Two Edmond men, the former CEO of an Oklahoma City oil and gas company and hundreds of thousands of dollars allegedly spent on extravagant lifestyles are part of a complex fraud case.
Shaun Mullins, attorney for the Oklahoma Department of Securities, said the case involves violations of the Oklahoma Uniform Securities Act, and his agency enforces the law.
very important that officers and directors of public companies fulfill their securities law obligations, Mullins said, noting that investors need adequate information so they can have confidence in their investments.
Mullins declined to comment on how the agency learned about the alleged fraud. Mullins said the agency actions have halted ongoing fraud at a public company, assets have been frozen and the return of funds was sought.
The case is still under investigation.
In Thursday edition, The Edmond Sun reported that Brent Mueller, of Edmond, had pled guilty to failing to report the illegal taking of $1 million from Oklahoma City Quest Resources Corporation.
Mueller is the former purchasing director for Quest. In court, Mueller admitted that in the summer of 2008, he learned that a now former senior Quest executive had illegally wired $1 million out of Quest to use for personal investment in Oklahoma Hydrogen Gas Technologies.
Upon learning of that illegal conduct Mueller admitted he took several steps to cover up that crime, including lying to Oklahoma Hydrogen about the source of the investment and trying to recover the $1 million to prevent Quest from learning about it, court officials said.
Mueller also finds himself a defendant in a lawsuit filed by Quest earlier this month in Oklahoma County District Court. The suit also names David E. Grose, of Edmond, among others. It sought an asset freeze and damages related to the kickbacks and the misappropriation.
Grose, Quest former chief financial officer, also is a defendant in a lawsuit filed last month in Oklahoma County District Court by the Oklahoma Department of Securities.
The lawsuit alleges that Grose and Mueller received kickbacks from several related suppliers during a two year period. The lawsuit also alleges that in the third quarter of 2008, Grose and Mueller engaged in the direct theft of $1 million for their personal use.
Bill Price, Mueller attorney, said he does not comment on pending litigation.
James McMillin, Grose attorney, also declined comment for the same reason. In court, Grose stated that because there was an ongoing investigation, he invoked his Fifth Amendment privilege against self incrimination.
Mueller will be sentenced in about 90 days. He faces up to three years in prison and, as part of the plea agreement, he must pay restitution to the victims of his crime.
Dan Webber, Cash attorney, said his client asserts that he is innocent until proven guilty. Webber said Cash is working with the Oklahoma Securities Commission to clarify the underlying facts.
Webber said Cash is not connected to the kickback scheme associated with Grose and Mueller.
According to court papers, Grose has 25 years of financial experience, primarily in the exploration, production and drilling sectors of the gas and oil industry, and his positions with Quest and Quest Energy included CFO and principal accounting officer.
Grose and Mueller entered a conspiracy with defendant Rodger H. Brooks in which they would place orders for Quest to buy pipe from Brooks companies Reliable Pipe and Equipment, Mid Continent Pipe and Equipment, RHB Global and RHB, the Quest lawsuit alleges. Grose and Mueller would mark up the price of the pipe and they would split the amount.
Grose received about $850,000 in kickbacks and Mueller about $860,000, Quest alleges.
Grose and Mueller used the kickbacks and funds they wrongfully converted and fraudulently obtained for their personal use and to support an extravagant lifestyle, including the purchase of homes, boats and cars, Quest alleges.
Attempts to identify Brooks attorney by press time were not successful.
Beginning in at least 2005, Cash caused Quest money to be transferred to a bank account in the name of Rockport Energy, the Oklahoma Securities Commission lawsuit alleges. By July 2008, transfers to the account from Quest totaled $10 million.
To create the illusion that the money transferred to Rockport Energy was returned to Quest, Cash directed a series of suspicious financial transactions between the two companies, the lawsuit alleges.
Specifically, on or within a day of the end of each Quest fiscal quarter, Cash allegedly issued a check drawn on the Rockport account, made payable to a Quest entity. The check would then be deposited into the bank account of the payee.
At all times, the balance on the Rockport account at the time each check was issued contained insufficient funds, according to court papers. The balance on the account rarely exceeded $2,000.