This NY Sunday Times article reports on the lawsuit of former federal government oil and gas auditor Bobby L. Maxwell, who is suing Kerr-McGee Corporation in Denver federal court for underpayment of oil and gas royalties to the federal government on oil and gas wells producing on federal lands. Under an obscure federal statute that rewards private citizens who expose fraud against the government, Maxwell and his counsel stand to recover as much as $15 million if they ring the bell in the lawsuit, which is scheduled for trial on January 16.
Although I know nothing about the particulars of the Maxwell case other than what is reported in the article, underpayment of oil and gas royalties is not uncommon. Indeed, when I am retained by royalty owners in a reorganization case of an oil and gas company, my standard advice is for the royalty owners to hire an experienced oil and gas auditor to conduct at least a review of the debtor’s royalty payments. When an oil and gas company starts having financial problems, scrimping on royalty payments is not an unusual occurrence.