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. His lifestyle included use of private charter jet services as well as many other exclusive memberships.
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.

The London Crackdown

Business Week

Insider trading and other types of financial fraud are among the toughest crimes to detect and prosecute. But Britain's market regulators are turning up the heat

It's the £30bn industry that has prospered like no other during the recession – but nobody champions its success. Those working in it operate across all sectors, from public to private, with little regard for the consequences of their actions. They might work near you in the office or they might be the bloke you say hello to down the pub. You might be sitting next to one now.

They are Britain's fraudsters: difficult to detect, almost impossible to put behind bars. But last week the big crackdown that has long been promised by the UK's authorities began.

Dawn raids by the Financial Services Authority (FSA) and the Serious Organised Crime Agency (Soca) saw seven arrests in the Square Mile, with employees from some of the City's most august firms, including Deutsche Bank (DB) and BNP Paribas (BNPQY), as well as hedge fund Moore Capital, being collared. The arrests for insider trading were the culmination of an investigation that started in 2007. In one swoop, on Tuesday morning, the FSA gathered together 143 staff and, with officers from Soca, raided the homes of the suspects – arresting one at an airport – and took them for questioning. Most of the alleged suspects are now on bail or waiting to be released.

A few weeks ago, after a four-year investigation by the FSA, Malcolm Calvert, a former partner at Cazenove, that most blue-blooded of banks, was sentenced to nearly two years in jail for his part in an insider-trading scam that netted him more than £100,000.

Across from the City, London's Serious Fraud Office (SFO), much maligned for some high-profile failures in the past, scored its own successes.

Last week the agency launched one of its biggest operations in years – more than 100 SFO officials and 40 police were involved – with the arrest of three directors of Alstom (ALSMY), the engineering company, for price-fixing.

And two weeks ago, the SFO struck a notable blow when it forced Innospec Limited, a British subsidiary of an American chemicals firm, to pay more than $12m (£8m) in fines after it admitted paying bribes to win deals.

But it's the launch of the most high-profile City insider-dealing raid in years that has really captured the imagination. "There has always been a belief among people who work and police the City that insider trading remains rife," says Tim Harvey, a former City of London fraud investigator and now director of UK operations at the Association of Certified Fraud Examiners (ACFE). "But it is so difficult to get successful convictions for insider dealing. Indeed, with increased sophistication, I think it's probably more difficult than it has ever been." He adds: "Given the huge splash the FSA and Soca have made with these arrests, using so many officers, I really hope they get a result – because, if they don't, it'll set investigations in this area back many years."

Insider dealing became a criminal offence only in 1980, a year after Baroness Thatcher came to power.

The wave of privatisations and new levels of share ownership that she forced through in the following years necessitated a cleaning up of the trading system, where dealing on the inside was endemic.

Assessments of the extent of insider dealing since have been few and far between, although a paper from the FSA in 2006 did seek to "measure market cleanliness". It estimated that between 24 to 32 per cent of takeover bids in the UK during the early part of the Noughties involved insider dealing to significantly move the target's share price.

The laws governing insider dealing have been refined a number of times since 1980, most recently taking into account a 2003 EU directive.

But despite the deterrent – insider dealing carries a maximum sentence of seven years – the number of successful prosecutions remains low.

According to data compiled by Professor Paul Barnes from Nottingham Trent University, there have been just 22 successful criminal cases for insider dealing. Only two so-called "rings of City professionals" have been unearthed and received criminal sanction since 1980.

Since 2000, the FSA has also brought 15 successful civil actions for market abuse – 10 of which directly relate to insider dealing.

Barnes says: "If last week's arrests of a so-called 'insider-trading ring' across firms proves to be successful, then it will be quite remarkable. This is a biggie. The rings that have been caught in the past were quite small."

According to Barnes, the largest incident of a ring being caught was in 2003 with the case of Spearman, Smith and Payne. This involved a proofreader at a firm of commercial printers, who used his access to draft prospectuses and offer documents to profit from price changes in 27 takeovers and merger deals. The ring netted the perpetrators more than £300,000 although none actually worked in the Square Mile.

"Although I wasn't allowed to listen to the evidence directly, I gather that the case made extensive use of phone taps, something that has probably played a part in these latest arrests," says Barnes.

Alongside phone taps, the authorities now have a much larger arsenal of weapons to deploy and a much more sophisticated system by which to track suspicious movements in share prices, which often acts as the catalyst for investigations.

A few years ago, the FSA installed Sabre, a powerful – and expensive – computer system which analyses suspicious trading patterns in stocks.

The regulator is also making greater use of whistleblowers who, under new legislation, are granted immunity from prosecution if they testify against ringleaders guilty of crimes.

Praise has also been heaped on Margaret Cole, head of enforcement and crime at the FSA, for her determination to carry out the crackdown. One report described her as "an Eliot Ness for the 21st-century City of London"

The Cambridge-educated Cole – who completed her A-Levels two years earlier than normal – has an enviable CV, having played influential roles as one of the lawyers in the collapse of BCCI and having acted for pensioners looking for recompense from Robert Maxwell.

"Margaret Cole has been very vocal in promising to go after people, and she is undeniably good," says the ACFE's Harvey. "But I think Philip Robinson [a former director of financial crime at the FSA] should take some of the plaudits, too."

If reports are to be believed, a wave of further arrests are planned this week, with as many as 11 people likely to be charged over an insider-trading scam hatched at a printers in north London. Project Saturn, the moniker given to the raids, is certainly likely to further enhance the reputation of Cole and her colleagues at the FSA.

It seems that the great City crackdown has only just begun.