faces hard task on Key board
By David Milstead
Rocky Mountain News
Wednesday, January 31, 2007
Bill Owens could have chosen an easier task for his first
corporate board. Earlier this month Houston-based Key Energy
Services said Owens would become a director.
In years past when directorships were easier, the corporate
board was an excellent source of post-government income.
After Enron, et al, Sarbanes-Oxley made the job a lot more
But at Key Energy Services? Owens might drop down a hole as
deep as one of the oil wells the company drills.
The company has been unable to file an annual report since
2002. That's landed the company on the "pink sheets," where
only the most risky stocks reside.
The trouble started in March 2004 when the company said it
was still working on its 2003 audit. Two weeks later it
became more serious. A potential writedown was bigger than
first believed and the company discovered "misappropriation
of funds" and "diversion of company assets."
Key Energy said it replaced managers and terminated
employees. Unsurprisingly, the SEC began to investigate.
Ultimately 14 executives including the company's CEO,
general counsel and chief financial officer left. According
to SEC filings all three are now suing the company for
breach of contract, as are the former controller and
Former general counsel Jack Loftis Jr. claims he was fired
after making allegations about CEO Francis John. The company
said CFO Royce Mitchell also made allegations against John,
and several of their concerns led to an accounting review.
The company finished its work on years through 2002, wiping
out more than $214 million in pretax profits. It couldn't
figure out the proper period for another $87 million of
adjustments so it put them in the 2003 financials, violating
generally accepted accounting principles. Auditor KPMG
provided a qualified opinion on the income statement, then
"Just as good people came into Qwest after Joe Nacchio, good
people have come in here," he said. "It's a good, solid,
fundamentally strong company, and I'm trying to be part of
bringing this company back."
Owens was recruited by Key Energy Chairman Phil Marcum, a
board member since 1996 who's also the CEO of Denver-based
"Probably the best board in the world to join is a company
that's about to be certifiably cleaner because of the
scrutiny," Owens said.
He got $85,000 worth of stock in Key Energy when he agreed
to serve on the board and will make $65,000 in cash each
year. That's a lot more than his $90,000 state salary. But
Key Energy may provide headaches that make governing look
David Milstead and James
Paton take turns writing Up and Down 17th Street.
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