The Securities and Exchange Commission has charged Penn West Petroleum and three of its former top finance executives with fraud, alleging they improperly moved hundreds of millions of dollars from operating expense accounts to capital expenditure accounts.
The SEC said former CFO Todd Takeyasu, former vice president of accounting and reporting Jeffery Curran, and former operations controller Waldemar Grab orchestrated the fraud, which allowed Penn West to artificially reduce its operating costs by as much as 20% during some periods, falsely improving metrics for oil-extraction efficiency and profitability.
“These executives breached their disclosure obligations to investors and kept hidden from the market the true nature of a key financial metric and the company’s struggle to control its operating expensesm,” said Gerald Hodgkins, associate director in the SEC’s enforcement division.
In a statement, Penn West said the charges were based on “historic” accounting practices that were discovered and reported to the SEC in July 2014.
Penn West this week changed its name to Obsidian Energy.
“We are naturally disappointed that the SEC has chosen to pursue these past matters which we reported to them and fully remediated years ago,” CEO David French said.
An attorney for Takeyasu said his client was confident “the SEC’s claims against him are meritless and he looks forward to defending this case vigorously and prevailing in court.” An attorney for Curran said the SEC’s portrayal of her client “bears no resemblance to reality” and he will be vindicated. Grab’s attorney could not be reached for comment.
The SEC’s complaint was filed in federal court in Manhattan.
At the time of the alleged fraud, Penn West was one of the largest oil producers in Canada.
The company was investigated by Canadian officials, but the Alberta Securities Commission opted not to bring charges.
“Our investigation led us to a different conclusion to that of the SEC,” a spokesperson for the ASC said.