Daily Archives: November 17, 2005

SEC shoe drops on former Patterson-UTI CFO

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pattersonutilogo2.jpgFollowing on the revelations of late last week, the Securities and Exchange Commission commenced a civil action yesterday to freeze the assets of former Patterson-UTI Energy, Inc. chief financial officer, Jonathan Dwane “Jody” Nelson, who the SEC accuses of masterminding the embezzlement of $70 million from the Snyder, Texas-based contract drilling company (a copy of the complaint is here. In addition to the freeze order, the SEC obtained the appointment of a temporary receiver over Mr. Nelson’s assets. The SEC’s press release on the lawsuit provides more information regarding the alleged scheme than has been made public to date:

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Cleveland businessman who bribed Brown Administration officials gets 15 years

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City_of_Houston_Logo.gifThe Chronicle’s Dan Feldstein has been doing a good job over the past couple of years of keeping track of the federal corruption investigation that has been going on in Houston and Cleveland, Ohio. In this article from today’s Chronicle, Mr. Feldstein reports that Nate Gray, the Cleveland businessman who was convicted earlier this year of bribing two former City of Houston officials from the administration of former Houston Mayor Lee Brown, was sentenced yesterday to 15 years in prison and ordered to pay $1.5 million to the Internal Revenue Service. Mr. Feldstein also notes that testimony of an FBI agent during the Gray trial indicates that the corruption probe involving former Brown Administration officials is continuing in Houston.
The two former Brown Administration officials who took the bribes from Gray — chief of staff Oliver Spellman and building services director Monique McGilbra — previously copped pleas in agreeing to testify against Gray and were sentenced to far lesser sentences earlier this year. The Justice Department news release on the Gray sentencing and the corruption probe is here, and the previous posts on this bribery scandal are here.

“Coach, did you see that guy’s tattoo?’

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adam_sandler6.jpgDo you recall me telling you that some folks in Texas take high school football very seriously? In the “you can’t make this stuff up” category, the following is from this article in today’s Chronicle:

Bigger. Faster. Better beards.
Looking back now, it should have been obvious that something was amiss about the adult football team that Texas Christian School fielded three weeks ago in Austin.
Not to mention the tattoos.
“Some of the guys had tattoos and full beards and looked like they were like 25,” Not Your Ordinary School senior running back David Johnson said of his opponents that Oct. 28 afternoon. “At the time, we thought they were just sort of big.
“Now we see why they looked so old.”
It turns out Johnson and his team unwittingly played a six-man team made up of college-age players, coached by Texas Christian [High School]’s Herc Palmquist. The Texas Christian varsity team was told the game had been canceled and they had the night off.
Instead, Palmquist brought eight college-age players to play what he called a “pickup game,” which NYOS won 28-18.
Now, Palmquist is serving a five-game suspension leveled by the Texas Association of Private and Parochial Schools, which governs Texas Christian athletics.

Read the entire article. If Coach Palmquist gets canned over this, perhaps he could scout for the Texans? On the other hand, given that Texas Christian lost the game even while using college-age players, maybe not.

Checking in on GM’s Enronesque experience

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gm2.gifFollowing up on posts here and here from last week, General Motors’ seemingly relentless descent into a formal reorganization under chapter 11 continued yesterday as its share price fell to its lowest closing since December, 1991. Previous posts on GM’s developing problems are here.
Probably the best indication of the risk of a GM bankruptcy is in the credit markets. Over the past week, the price of a GM bond maturing in 2033 has fallen about four points (i.e., about $40 per $1,000 face value) to yield 12.9%. On the other hand, the price of protection against a GM default in the market for credit derivatives is increasingly expensive. As of yesterday, the price of protection — essentially insurance against a default — on $10 million in GM bonds had risen to above $2 million up front plus $500,000 per year. That compares with a $1.6 million up front payment for such price protection just last week.
Interestingly, GM remains reasonably liquid, with around $19 billion in cash or other cash equivalents, and that liquidity is often touted by the company in media releases as proof that it is not contemplating a bankruptcy case. However, as folks who are familiar with reorganizations know, a company that needs to go through a chapter 11 case is far better advised to do so when it is flush with cash than to wait until its cash reserves have been depleted. A company in need of a reorganization never should wait until it can’t afford to go bankrupt.