Wednesday, December 19, 2012

Fall of oil exec Roger Parker marked by risky bets gone bad

originally appeared in The Denver Post:

Roger Parker appeared to have it all in 2007. He lived in a historic, $9 million mansion in Cherry Hills Village amid Denver's business and sporting elite. He golfed with John Elway. He traveled by private jet to gamble in Las Vegas and golf in Palm Springs.
Also that year, Parker completed the deal of his career. The chief executive of Denver-based Delta Petroleum sold a $684 million, one-third stake in the growing company to Tracinda Corp., owned by billionaire investor Kirk Kerkorian.

The transaction would be Parker's undoing, marking the start of a remarkable downfall. It played out, friends say, as a close business associate discovered that Parker, then married, was having an affair with his wife.
Parker and Delta struggled with risky bets gone bad. Tracinda forced Parker out after about a year and eventually took Delta into bankruptcy. It pursued Parker for more than $7 million from an unpaid loan but recently found just $46 in his retirement account and $10,000 in his brokerage account.

On Nov. 27, the U.S. Securities and Exchange Commission accused Parker of tipping off his close friend and another, as-yet-unidentified friend ahead of the Tracinda deal, allowing them to reap hundreds of thousands of dollars in ill-gotten gains. Some of his gains were used to finance use of a private charter jet company for business and personal use.
Two Cherry Hills homes — one Parker bought in 2004 for $9 million and the one it replaced, recently signed over to his ex-wife — are for sale.
An attorney for Parker did not respond to requests for comment for this story. He has not yet responded to the SEC's claims.

Interviews with friends, associates and businessmen, as well as scores of public documents, paint a picture of Parker, 51, as ambitious and aggressive, someone who set out early on a path toward multimillion-dollar success and social prominence.
He achieved both — with the help of a network of well-placed friends — but he took big risks along the way, spent lavishly and seldom settled for second-best.
Roger was a guy who thinks it all works out in spades, according to Delta's former chief operating officer.  At one point, he speculated aloud he would be worth $200 million someday.

Fast success
Parker was a standout student at the University of Colorado business-school program in mineral land management. It trained students to be the property-acquisition brains behind the geologic science that identified potentially drillable resources.
But the 1980s, with the petroleum industry tanking, wasn't the best time to aspire to be an oilman.
There were no jobs, recruiting was down 80 percent, and the only ones likely to find a job after the collapse were those with experience, or new grads, according to an associate who graduated with Parker in 1983. But Roger got involved from the start. While we were all in school, he was getting a feel for the business, getting connections and experience. Parker found fast success from hard work.

Only a couple years out of school, he had the big house, all the trappings of success, according to one source.
That happened at Ampet Inc., a small oil-and-gas company formed by Parker mentor and a family friend, a Breckenridge attorney, and his lawyer father, Parker's parents were investors in the business.
The younger Parker and the junior partner would remain business associates for years, beginning with Parker's seat as executive vice president of Ampet while still a student at CU, records show.
While Parker worked at Ampet, his business partner and an associate formed Delta Petroleum in 1984. Parker was first listed on Delta documents as secretary in 1987.

Golf friendships

Two months later, Parker's father, was nominated to the U.S. District Court bench in New Mexico by President Ronald Reagan.
The elder Parker eventually served as federal chief judge in New Mexico until 2003. Along the way, he invested in oil and gas — including Delta — and as of 2010 was drawing royalties on several Colorado wells, some in the range of $500,000 to $1 million, according to financial-disclosure records required of all federal judges.
Roger Parker's relationships reach deep into Denver's business community and stretch across years.

Boisterous in laughter and quick with a joke, Parker was often found hanging with pals at Elway's, in part because of a friendship with the former Broncos quarterback. Both exceptional golfers, Elway and Parker sometimes partnered in charity events, friends said.
Efforts to reach Elway through the Denver Broncos were unsuccessful.
One of Parker's closest friends is a CU graduate in mineral land management with Parker.
The two are avid golfers — with memberships at Cherry Hills and Castle Pines, among others — and big boosters of CU's athletic program, forming the elite Buff Club Cabinet with others including Van Gilder.
The CU graduate has found a level of success that eluded his friend. He recently sold his Cordillera Energy Partners III for $2.8 billion to the company where he started, Apache Corp. Efforts to reach the college friend for comment were unsuccessful.

Drive for status
Parker, twice divorced, enjoyed living large, primarily through houses, golf-club memberships and jets, friends say.
His drive for status was evident in a years-long pursuit of a home at the very pinnacle of Denver society.
Parker sold his first Cherry Hills house and moved into a two-story Tudor he built in 2001 next to the Cherry Hills Country Club. He borrowed $1.6 million to build it and borrowed another $9 million on it over the years. But friends said he was disappointed with the outcome.
In 2004, Parker bought a $9 million mansion from old-money oilman's family along the exclusive Cherry Hills Park Drive. Next door lived the Broncos head coach, and across the street was their legendary money manager.
But Parker was unable to sell the Tudor home, and it remains on the market. The mansion he bought from the oil family — one of the oldest in that area — also is for sale.
Parker acquired a quarter interest in use of a Citation 10 jet, and he sold half of that to Delta.

On a golf trip to Palm Springs, Parker and friends stopped in Las Vegas — the Bellagio and Venetian were among his favorite haunts — to play the tables. Parker believed he could break the house in blackjack, one associate said.
Parker isn't flashy, most comfortable wearing shorts and tennis shoes, driving an SUV, listening to Aerosmith and drinking rum and Coke, friends said.

Parker often does business with friends. One of those is Denver power broker and Parker's personal and business attorney. Earlier this year, Parker pledged 100,000 shares in Prospect Global Energy as collateral to his attorney's law firm for personal legal help, state corporation filings show. At the time, the shares were worth $1 million. Today, they're valued at $167,000.

His attorney who is not representing Parker in the SEC's insider-trading case, would not comment for this story.
One of the attoney's sons, is vice chairman and co-founder of the Denver company, which mines potash.
A Prospect investor who founded Hexagon Investments in 1992, also is a friend of Parker's. He would eventually loan $24.7 million into Parker's latest venture, Recovery Energy, according to financial filings. Efforts to reach the investor for comment were unsuccessful.

Lucrative introduction
Parker was introduced to Kerkorian by a former chauffeur who entered the oil-and-gas business after marrying the former Denver Post owner. The chauffeur, now a Las Vegas resident, had done business with Delta as far back as 2003.
For the introduction — and the resulting sale of a 35 percent ownership share of the Denver company — Davis landed about $5 million worth of Delta shares. Kerkorian would allege later in a settled lawsuit that Parker had secretly arranged contracts and business arrangements for Davis as part of the deal.
Tracinda bought in at $19 a share — Parker had pushed off an initial $17 bid and pressed for more — on New Year's Eve 2007. The $684 million purchase pushed the company stock up 19 percent in one day. It would eventually hit $24.78 from $15.51, when the Tracinda deal was announced.

The SEC alleges in its civil suit that in the months and days before the Tracinda investment was firm and made public, he sent dozens of text messages about it to his business associate. Insiders said Parker didn't even tell some of his closest board members and company executives about the impending deal.
In a related case, his business associate was indicted on criminal insider-trading charges that he allegedly made about $86,000 on the information. He has pleaded not guilty. The SEC alleges that another unnamed individual who is friends with him and Parker racked up a $730,000 payday on Delta stock.
The government has not accused Parker of profiting from the information.
Delta and Parker had encountered the SEC before. In 2006 and 2007 — prior to the Tracinda deal — the government investigated alleged backdating of stock options that were awarded to Parker and other executives. The SEC later dropped its inquiry, and a pair of shareholder suits alleging the practice were settled.

Margin call

Following the merger, it didn't take long before Parker's business plan — a no-hedge, keep-drilling approach — would weigh on Delta's books and, eventually, its stock price.
Several company insiders say Parker's steadfast refusal to hedge some of the company's natural-gas and oil assets against a potential price drop was its most critical undoing. Typically, energy companies hedge by agreeing to sell a portion of their future production at a set price or range.

Delta's former COO and chief geologist, said Delta could have hedged through 2015 but didn't. We'd still be around today if it had.
When shares in Delta dropped below $4 in November 2008, it triggered a margin call on Parker's brokerage account because he had pledged shares as collateral for loans.
Tracinda loaned Parker $7.5 million to cover the shortfall. It said in legal filings it wanted Parker to pay attention to Delta instead of his failing personal finances.
By January 2009, the situation was, in one insider's viewpoint, desperate. He was the eternal optimist of gas prices coming right back, the insider said.  They didn't.

By May 2009, Kerkorian had had enough. Three board members asked Parker to resign as chairman and CEO. Parker couldn't get along with new co-chairman Daniel Taylor, a Kerkorian board appointee.
Parker left with a severance payday of about $7 million.

New venture
Parker wasn't unemployed for long.
With the help of friends, he staged a comeback through a new venture, Recovery Energy.
While Reiman was the money lender, the oil-and-gas properties that made up Recovery's inventory came from Davis. Van Gilder provided the office space.
Parker paid for much of it with shares in the new company, a tactic he had used before.
Filings show the company's production and revenues followed a downward trend. Revenues in 2010 were $9.76 million but only $8.36 million in 2011. Oil and gas production in the second quarter of 2012 was down 24 percent from 2011.
Interest expenses in 2011 almost equaled the value of the oil and gas the company produced.

Parker engaged in an unusual practice with his Recovery shares that may have been intended to land a bigger payday or ward off a creditor such as Tracinda.
Normally, executives try to obtain the shares they are granted as quickly as possible, a process known as vesting.  Parker, however, amended his employment agreement 14 times over more than two years to push back the date when his Recovery shares would vest and come into his possession.

Tracinda in late August won a judgment for the $7.5 million loan — now $7.7 million — against Parker, who argued he'd been shorted about $5 million in an effort to sell the last of his Delta stock in 2009.

Tracinda has been following Parker with garnishment orders to collect — first on his pension account and then his securities account. Total garnered: $10,745.
It followed with a garnishment order at Recovery for Parker's salary, roughly $21,000 a month, and is making a grab at about 1.3 million of Parker's Recovery shares.
Parker resigned from Recovery on Nov. 14, just ahead of another garnishment effort by Tracinda. SEC notices show his business partner began selling Recovery stock heavily just after.
Two weeks later, the SEC named Parker a co-defendant in its insider-trading lawsuit against another associate.
Friends said he left town on a trip when the case was about to be made public.

Tuesday, December 4, 2012

Ecuador Seeks Damages from Chevron Oil Spill

Chevron Corp. (CVX) is facing its first test of whether farmers and fishermen from the Amazon rainforest will collect $19 billion in environmental damages from the world’s fourth-largest oil company.

A group of 47 Ecuadoreans have asked Ontario’s Superior Court of Justice to seize Chevron assets in Canada, ranging from an oil sands project to offshore wells, to satisfy a 2011 court ruling in the Latin American nation that ordered the company to pay for oil pollution dating to the 1960s. Chevron said the Ecuadorean judgment is outside Ontario’s jurisdiction and that the ruling resulted from bribery and fraud.

A hearing in Toronto today marks the Ecuadoreans’ inaugural step in a global collection effort that includes seizure attempts in Argentina and Brazil. The Ecuadoreans estimated Chevron has $12 billion in Canadian assets, a figure that equates to almost half of the company’s 2011 profit. An adverse Ontario ruling for Chevron would put at risk fuel-manufacturing and oil-production operations across Canada.

Robert Sweet, who helps manage $150 million at Horizon Investment Services in Hammond, Indiana, said it is a cause for concern, and as with all ecological disasters will take a long time to resolve.

The company’s presence in Canada dates back to the 1930s and includes an oil-refining complex in British Columbia, an Alberta oil-sands venture, offshore wells in the Atlantic Ocean, and cash held in Canadian bank accounts.

Every Strategy

San Ramon, California-based Chevron was on the losing side of last year’s ruling by a provincial Ecuadorean court that blamed decades of toxic soil and water contamination on Texaco Inc., which Chevron acquired in 2001. Texaco was found to have discharged into the environment saltwater and other byproducts of oil drilling. Texaco quit the country and its equipment was taken over by the Ecuadorean state oil company in 1992.

The $19 billion ruling handed down last year by a court in Lago Agrio, a town near Ecuador’s border with Colombia, held Chevron accountable for health and environmental damages resulting from chemical-laden wastewater dumped from 1964 to 1992.

The Ecuadorean plaintiffs, from the remote northern Amazon River basin, are seeking enforcement of the judgment outside their home country because Chevron has no refineries, oil wells, storage terminals or other properties in the nation. Pablo Fajardo, their lead lawyer in Ecuador, said during a February 2011 conference call with reporters he would use every strategy and manner at his disposal to collect the award.

Corporate Veil

In a Nov. 23 filing, Chevron argued the Ontario court has no jurisdiction to grant the Ecuadorean judgment because the company’s Canadian units are indirect subsidiaries with independent boards separated from the U.S. parent by several levels of ownership.

The Ecuadoreans face an “uphill battle” because they must convince the court that Chevron and its Canadian operations should be treated as one entity rather than separate companies, said Barry Leon, a partner and head of the international arbitration group at Perley-Robertson, Hill & McDougall LLP in Ottawa.

Chevron rose 0.8 percent to $106.35 at 9:35 a.m. in New York today. The shares have increased 9.1 percent in the past year.

Pending Arbitration

According to Chevron Chairman and Chief Executive Officer John Watson, the Ecuadoreans’ lawyers have blackmailed judges, bribed judges, falsified evidence, falsified expert witnesses, ghostwritten expert opinions and ghostwritten court judgments. If the plaintiffs were confident in the “integrity” of the ruling, they would seek enforcement in U.S. courts with jurisdiction over the parent company, Kent Robertson, a company spokesman, said in an e-mailed statement.

Alan Lenczner, the Toronto attorney from the firm Lenczner Slaght Royce Smith Griffin LP representing the Ecuadoreans, when reached by phone declined to comment on the case.

Leon said  it is likely that the initial decisions will be appealed.

Chevron doesn’t disclose how much it spends on legal fees.

The Hague

Chevron is awaiting a ruling in a related case before the Permanent Court of Arbitration, the 113-year-old panel based in The Hague that handles trade disputes between corporations and nations. Chevron filed the arbitration claim in 2009, accusing the government of Ecuador of reneging on a 1998 contract that absolved Texaco of Amazonian pollution claims. Three days of hearings in the case concluded yesterday, Robertson said.

Chevron’s campaign to avoid payment suffered a setback last month when the U.S. Supreme Court upheld a lower-court decision that rejected the company’s request for a pre-emptive block on collection efforts in Chevron’s home country. The lower court had ruled that it didn’t have authority to thwart payment when the Ecuadoreans hadn’t yet filed such a claim in the U.S.

Unfair Influence

Following the filing of their Canadian seizure request in May, the Ecuadoreans sought similar forfeitures in a Brazilian tribunal in June and in Argentina earlier this month. A judge in Buenos Aires ordered some Chevron bank deposits held in escrow while the case is pending, Enrique Bruchou, a lawyer for the Ecuadoreans, said in an interview on Nov. 7.

Today, in paid statements published in two Argentine newspapers, Chevron urged the local court to release its money from escrow and indicated the company intends to pursue a legal defense identical to that employed in Canada. “Chevron Argentina has never had operations in Ecuador and has no relation with the fraudulent trial in Ecuador,” the company said in the newspapers Clarin and La Nacion.

Transparency International

Chevron has accused the Ecuadorean government of unfairly influencing court proceedings that led to the $19 billion ruling and alleged that a damage assessment provided by a court- appointed expert was ghostwritten by consultants and lawyers hired by the plaintiffs.

Lawyers for the Ecuadoreans including Stephen Donzinger have accused Chevron of engaging in a campaign to discredit them, entrap an Ecuadorean judge that presided over the case and set up dummy corporations in Ecuador to hide Chevron’s alleged role in testing soil samples from the pollution sites.

Ecuador ranked 120th out of 183 nations in Transparency International’s 2011 corruption-perception index, where No. 1 New Zealand is perceived to be the most honest. Albania, Liberia and Lesotho were perceived as less corrupt than Ecuador, according to the index.

In February 2011, Chevron filed a racketeering lawsuit that’s ongoing against the Ecuadoreans and their lawyers in New York for “leading a fraudulent litigation and PR campaign against the company.”

Exxon Mobil Corp. (XOM) is the world’s biggest oil company by market value, followed by PetroChina Company Ltd. and Royal Dutch Shell Plc (RDSA), according to data compiled by Bloomberg.

New Flex-Fuel Could Damage Engines

story first appeared in Detroit Free Press

The AAA says the Environmental Protection Agency and gasoline retailers should halt the sale of E15, a new ethanol blend that could damage millions of vehicles and void car warranties.

AAA, which issued its warning today, says just 12 million of more than 240 million cars, trucks and SUVs now in use have manufacturers' approval for E15. Flex-fuel vehicles, 2012 and newer General Motors vehicles, 2013 Fords and 2001 and later model Porsches are the exceptions, according to AAA, the nation's largest motorist group, with 53.5 million members.

AAA President and CEO Robert Darbelnet tells USA TODAY that he believes unfamiliarity with E15 among Americans provides a strong possibility that many may improperly fill up using this gasoline and damage their vehicle."

BMW, Chrysler, Nissan, Toyota and VW said their warranties will not cover fuel-related claims caused by E15. Ford, Honda, Kia, Mercedes-Benz and Volvo said E15 use will void warranties, says Darbelnet, citing potential corrosive damage to fuel lines, gaskets and other engine components.

Gasoline blended with 10% ethanol has become standard at most of the nation's 160,000 gas stations, spurred by federal laws and standards designed to use more renewable energy sources and lessen the nation's dependence on foreign oil. Pushed by ethanol producers, the EPA approved the use of E15 -- a 15% ethanol-gasoline blend -- in June over objections from automakers and the oil industry. It's been available at a handful of outlets in Kansas, Iowa and Nebraska since July.

EPA stickers affixed to gas station pumps say E15 is safe for use in virtually all vehicles 2001 and newer. (USA TODAY made repeated requests for EPA comment.)

But AAA -- in an unusual warning for a travel organization -- says the sale and use of E15 should be stopped until there is more-extensive testing, better pump labels to safeguard consumers and more consumer education about potential hazards.

Bob Dinneen, CEO of the Renewable Fuels Association, says E15 is safe for virtually all post-2001 vehicles, based on extensive government-sponsored testing.

But the American Petroleum Institute says a three-year study by automakers and the oil industry found that E15 is a consumer safety issue for a majority of drivers with pre-2012 vehicles.

The National Association of Convenience Stores says it's also worried about the effect of E15 on station pumps and fuel lines.

Scott Zaremba, who has been selling E15 blends at several of his eight Zarco 66 stations in Kansas since July, says no customers have complained. He's fueling his 2001 Chevy pickup with the E15 blend.

Sea Level Debate Continues

story first appeared on

Echoes of Superstorm Sandy remain from Manhattan's once-flooded streets to Maryland's battered boardwalks to New Jersey's washed-away beaches.

No surprise. The Eastern Seaboard — or any coastal region — occasionally finds itself in the cross hairs of ferocious ocean storms. But it may have taken Sandy to drive home the added threat that scientists have been warning about for years: a rise in the sea level.

More of the same could lie ahead, suggest ocean scientists such as U.S. Geological Survey oceanographer Asbury Sallenger. The storm triggered the expected arguments about global warming's role, but that debate aside, the new constant for any storm is the increasingly important role likely to be played by sea level. In a study out Tuesday, climate scientists led by Stefan Rahmstorf of Germany's Potsdam Institute report that since 1993 sea level has risen worldwide at a rate 60% higher than predictions. The findings appear in the Environmental Research Letters journal.

Sallenger says sea-level rise is accelerating along the East Coast

The real question, Sallenger and other ocean experts say, is what effect rising sea levels, which are accelerating along a "hotspot" stretching from Cape Hatteras, N.C., to Maine, will have on storms hitting these places.

In June, Sallenger and colleagues reported in the journal Nature Climate Change that sea-level rise along the U.S. Atlantic Coast has been climbing at a rate three to four times higher than the global average since 1950. About 1.5 inches per decade now, it doesn't sound like a lot. But each inch counts, and New York Harbor's water level is 11 to 16 inches higher than it was a century ago, Sallenger says.

The accelerating sea-level rise springs partly from "subsidence," where groundwater withdrawals to sate thirsty towns and farms along the coast cause the ground to sink, and partly from warming waters in the North Atlantic, the study suggests. Warmer water simply takes up more space than cold water.

Not to be forgotten is that teetering infrastructure poses as much of a problem as global warming, says Alan Weisman, author of The World Without Us.

Most climate scientists would see Superstorm Sandy as a largely natural event, not something born as a result of global warming, says Texas Tech climate researcher Katharine Hayhoe. But she acknowledges that the storm, sea-level rise and climate change are hard to disentangle.

A water level that's a few inches higher pales in comparison with a 14-foot storm surge in Lower Manhattan, but those few inches meant the surge was higher than it might have been otherwise.

And was the storm surge stronger because of climate change? Indeed. Warmer ocean temperatures could have provided up to 20% greater power for the storm, so climate change's role isn't necessarily an either-or question, Hayhoe says.

Most climate projections that look ahead to the coming century see hurricanes that look stronger, but are fewer in number. Why? Warmer waters strengthen storms but stronger winds above the equatorial oceans wreck the stillness that burgeoning tropical storms need to become ferocious hurricanes.

MIT hurricane expert Kerry Emanuel says that while he does expect increased hurricane damage in the U.S. as the climate warms, Sandy is not a pure example of a hurricane. It was a hybrid event that started as a tropical storm, grew into a hurricane, and morphed into an intense nor'easter. He says climate science doesn't have enough data to say whether these hybrid storms like Sandy will become more or less frequent.

It also doesn't matter, Emanuel writes in the current Foreign Policy magazine, because the real problem is sea-level rise.

The 2007 Intergovernmental Panel on Climate Change estimated that warming alone, which expands ocean waters, would raise sea levels worldwide by almost two feet over the next century. Add in future melting glaciers in Greenland and elsewhere, and sea level could rise more than 3 feet by then, NASA climate scientist James Hansen and Stanford's Ken Caldeira reported at last year's American Geophysical Union meeting in San Francisco.

Sallenger believes the "hotspot" study suggests this worsening will continue, yet he acknowledges other researchers are taking a more "wait-and-see" attitude.

Also worth noting, a 2009 study led by Environmental Protection Agency analyst Jim Titus concluded that 60% of the East Coast's coastal land is zoned for more development, while less than 10% is zoned for wetlands that soak up storms.

At the same time, dikes, or seawalls, are an unlikely remedy for the entire East Coast, says civil engineer Robert Traver of Villanova (Pa.) University. Of the 25 most-densely populated counties nationwide, 23 are coastal ones. "We can't build barriers around everything," Traver says.