The US Securities and Exchange Commission charged two former Quest Resource Corp. executives on June 17 with securities fraud and other violations for allegedly misappropriating millions of dollars.
It alleged that Jerry D. Cash, who was Quest’s chairman and chief executive, and David E. Grose, who was the Oklahoma City independent producer’s chief financial officer, caused Quest to make a series of transfers to a separate company which Cash controlled.
Cash tried to conceal the transfers by ostensibly transferring the funds back to Quest at the end of each quarter, according to the SEC. It said that by the time the scheme, which began in June 2004, ended in August 2008, Cash had misappropriated $10 million from Quest.
The SEC said that its complaint states that none of these transactions were disclosed in the multiple quarterly and annual filings, signed and certified by Cash and Grose, which Quest made with the SEC during the periods in question. The federal securities regulator also claimed that Cash and Grose signed multiple representation letters to Quest's outside auditor attesting that all related party transactions had been disclosed and that there had been no fraud involving management.
Cash resigned from Quest on Aug. 25, 2008, after other company officials discovered, in connection with an Oklahoma Department of Securities inquiry, that the money had been misappropriated. They formed a special committee with representatives from Quest and its two subsidiaries, Quest Midstream Partners LP and Quest Energy Partners LP, which began an investigation and placed Grose on paid administrative leave. He was fired on Sept. 16.
The three companies’ boards also appointed David C. Lawler, Quest Resource’s chief operating officer, president on Aug. 25 and named him chief executive in May. Quest continues to cooperate with SEC and other agencies which are investigating the matter, a spokesman told OGJ Washington Pulse on June 23.
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