Quest Axes CFO It Had Put on Leave

David Grose is now out, while Quest and its related LPs look for a permanent replacement. Jack Collins remains as interim.
Stephen TaubSeptember 16, 2008

The CFO who was put on leave last month by Quest Resource Corp. and two related master limited partnerships — Quest Energy Partners L.P. and Quest Midstream Partners L.P — has now been fired.

David Grose was “terminated,” the company said, noting that an investigation of questionable transfers of $10 million in company funds to an entity controlled by the chairman CEO is continuing.

Quest said that while it looks for a new permanent CFO, Jack T. Collins will continue to serve as interim CFO of the companies, and Kroll Zolfo Cooper LLC will continue to assist in the accounting and finance functions for the companies. Kevin Golmont of Kroll will continue to lead Kroll’s efforts in those functions.

In August, CFO Grose was placed on administrative leave at the same time chairman and CEO Jerry Cash resigned following the discovery of the questionable transfers.

The oil and gas exploration and production company also said at the time that a special committee conducting an internal investigation had cautioned the companies that, although company records had been reviewed and interviews conducted, significant additional work remained before the full extent of any inappropriate activity could be known.

The special committee and its advisers are also working to determine the effect of those transfers on the companies’ financial statements, the methods by which the companies’ internal controls may have been circumvented by those transferring the funds, and the appropriate remedial measures. In addition, an attempt is being made to identify possible sources of recovery of any transferred assets. “At this time, the companies cannot accurately predict when the investigation will be complete, what the results of that investigation will be, or whether any recovery of the missing assets can be made,” the company said.

When the company initially announced the problems, it reported the matter to the Securities and Exchange Commission, and said it was cooperating with the SEC, the Oklahoma Department of Securities, and the U.S. attorney’s office in Oklahoma City. The discovery of the alleged self-dealing arose from an inquiry from the Oklahoma Department of Securities. The company last month said that promptly after the discovery, members of the three company boards met in joint sessions and formed a joint special committee to investigate the matter and consider the effects on the companies’ financial statements.

Quest Resource owns the right to develop about 130,000 net acres in the Appalachian Basin of the Northeast U.S. Quest Resource operates and controls Quest Energy Partners and Quest Midstream Partners through its ownership of their general partners.

Attempts by to reach Grose were unsuccessful.