Our investigators were called in to assist the general counsel of a major oilfield services company that had purchased an established construction company. The oilfield services company opted to keep the construction company’s’ founder on a multi-year contract to manage the newly acquired subsidiary, and aid in the transition.
A few years after the acquisition, an auditor noted some inconsistencies in the subsidiary’s aviation expenditures, most of which involved charges for an aircraft being used to ferry work crews to an overseas location. The company that owned and operated the corporate jet was, in fact, owned by the founder of the subsidiary. He had negotiated a side contract for oilfield crew air transport services as part of the sale of the construction company.
By tapping into an aviation background, the investigator was able to document that the former owner had manipulated aircraft registration numbers to buy a used jet, refurbish and upgrade it at the expense of the subsidiary, and then sell it at a personal profit – while making it appear that it was ordinary repair and maintenance work being done on a different plane covered under the lease.
Further, the investigator was able to identify, track down, and interview pilots who supplied information that revealed numerous billings to the subsidiary for trips unrelated to oilfield services.
In the ensuing lawsuit and trial, the parent company was awarded a judgment for actual and punitive damages exceeding $20 million, which was affirmed on appeal.
Whenever a former owner is kept on to manage an acquired entity, it is wise to keep careful tabs on expenses – especially any that result from side contracts with companies controlled by that person. The certified investigators and fraud examiners at ResultQuest have proven time and again their ability to discover patterns of irregularities and conduct the investigation needed to prove and prosecute their occurrence.
If you suspect financial irregularities call the ResultQuest professionals at 713-781-9040 for help in identifying and resolving them.