Risk & Compliance

In Quest for Answers, CFO Is Put on Leave

With CEO of Quest Resource energy companies out after report of $10m "questionable transfer" to an entity he controlled, finance duties are turned ...
Stephen TaubAugust 25, 2008

The chairman and CEO of Quest Resource Corp. and two related energy companies resigned after the discovery of questionable transfers of $10 million in company funds to an entity controlled by the CEO. At the same time, the CFO was placed on administrative leave while an investigation is conducted.

Jerry Cash resigned immediately from the top position at Quest Resource, according to a press release from the Oklahoma City-based oil and gas exploration and production company, and two related master limited partnerships: Quest Energy Partners L.P. and Quest Midstream Partners L.P. The decision to put finance chief David Grose on a paid administrative leave of absence during the investigation was not discussed.

The discovery of the alleged self-dealing arose from an inquiry from the Oklahoma Department of Securities. The company said that promptly after the discovery last week, members of the three company boards met in joint sessions on Friday and over the weekend, and formed a joint special committee to investigate the matter and consider the effects on the companies’ financial statements.

The release said that the committee retained a representative of Andrews Kurth LLP to lead an investigation, and that Quest said it has reported the matter to the Securities and Exchange Commission and other appropriate governmental and regulatory organizations. The company said it intends to fully cooperate.

The boards also announced they elected David Lawler — COO of Quest Resource since May 2007 — as president of each entity, and appointed him as a director of Quest Resource Corp. to fill the vacancy created by Cash’s resignation. Lawler was described as having more than 17 years of oil and gas industry experience in various senior management and engineering positions.

Quest said it retained Kroll Zolfo Cooper LLC to assist in the accounting and finance functions during Grose’s absence. Kevin Golmont will lead Kroll Zolfo Cooper’s efforts.

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

Quest Energy Partners LP was formed by Quest Resource to acquire, exploit, and develop natural gas and oil properties and to acquire, own, and operate related assets. Quest Midstream Partners LP was formed by Quest Resource to acquire and develop transmission and gathering assets in the midstream natural gas and oil industry.