Lubbock, TX. Oil Company CFO Steals $80 Million: Where Was SOX?

Jonathan Dwane Nelson, the former chief financial officer and secretary of Snyder,TX-based Patterson-UTI Energy Inc. oil exploration and production company,was charged with submitting and fraudulently approving phony invoices to Patterson-UTI from a separate company he controlled and authorizing payment of the invoices by Patterson-UTI.

Details: Nelson was somehow able to circumvent whatever internal controls existed at Patterson-UTI between 2001 and the end of 2005 in order to
have 49 phony invoices from XIT Land & Energy Inc.,a company he controlled, paid by Patterson-UTI. The payments ranged from $550,000 to a final payment in October 2005 of $3.2 million.

According to court documents in the case filed against Nelson by the SEC, $78 million fraud was finally discovered when “the company” initiated
a review of its payroll and payroll tax accounts and in late 2005 discovered several “irregularities.”

Complication: In a possible indication of shareholder outrage at the company’s apparent abject failure to implement the types of controls required by
Sarbanes-Oxley, Patterson-UTI recently announced that “two purported derivative actions have been filed in Texas state court in Scurry County,Texas against the directors of the Company alleging that the directors breached their fiduciary duties to the Company as a result of the alleged failure to timely discover the existence of the embezzlement.”

The company said it had established a “litigation committee” of two directors to determine how the company should respond to these allegations.

Pricewaterhouse Coopers LLP’s Houston office was the company’s outside audit firm during the time of Nelson’s alleged criminal activity.

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