Newspaper article THE JOURNAL RECORD

Former Executive at Oklahoma-Based Quest Describes Broken Corporate Culture, Malfeasance

Newspaper article THE JOURNAL RECORD

Former Executive at Oklahoma-Based Quest Describes Broken Corporate Culture, Malfeasance

Article excerpt

Testifying at a federal sentencing hearing for his former colleagues at Quest Energy Partners on Friday, PostRock Energy Corp. CEO David C. Lawler described a broken corporate culture at Quest and how he discovered that $10 million of the companies' money had been secretly siphoned into a bank account controlled by former chief executive Jerry Cash.

After Lawler launched an inquiry into the missing Quest funds, Cash visited his office and tried to convince him that the money was used to fund a secret business entity to scout out new drilling locations for the energy companies, he testified.

"He (Cash) looked me in the eye and assured me with every confidence in the world that those funds were used for corporate purposes and that now he felt it was time for the money to be returned," Lawler said. "... It was common knowledge at the company that Jerry didn't have the funds to cover the $10 million."

Some of the misappropriated millions were tied up in Cash's Nichols Hills mansion, which he spent $5 million renovating, according to court records and testimony.

Lawler was chief operating officer at Quest and later led the reorganization of the companies into PostRock Energy after the missing $10 million was discovered and Cash was forced to resign.

Cash faces up to 10 years in federal prison and $5 million in fines after pleading guilty in February for failing to disclose the $10 million in diverted corporate funds on federal financial reporting forms. A federal jury found former Quest Chief Financial Officer David E. Grose guilty in February of three counts of wire fraud after defrauding Quest out of $1 million. Grose faces up to 20 years in prison and $2 million in fines.

Battling a bad case of laryngitis, Lawler winced as if in pain on the witness stand as he described in a raspy voice how Quest's strained finances were a source of ongoing problems.

Quest frequently lacked sufficient funds to pay vendors, which led to work stoppages that interfered with the companies' daily operations, Lawler said.

Stressed about the companies' finances, Grose would often run down the halls of Quest's Oklahoma City corporate headquarters, shouting profanities, Lawler testified. His frequent tirades earned Grose the nickname "drama queen" around the office, Lawler said.

When Lawler requested financial reports from Grose, they never arrived on time and were rife with accounting errors, he said. …

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