Skip to main content

InterOil: Deal or No Deal? Does it Matter?

Fraud Discovery Institute (co-founded by convicted felon turned fraud fighter Barry Minkow) is skeptical about a report in the Sunday Chronicle in Papua New Guinea claiming that InterOil (NYSE: IOC) entered into a Preliminary Commitment Agreement with Mitsui for developing phase one of the Elk/Antelope LNG project, subject to final ratifications.

According to Fraud Discovery's press release:
Over the past year, media outlets—citing no or anonymous sources—have reported that no less than five companies appeared to be ready to ink deals with InterOil (NYSE: IOC) to help finance a liquefied natural gas (LNG) plant in Papua New Guinea, which InterOil estimates will cost up to $7 billion.
The media sizzle of “imminent” LNG partners mirrors an InterOil-style pattern of prematurely pumping up company “news” that never quite pans out.
[Snip]
“Getting a preliminary letter of intent from any one of these companies that contains multiple ‘outs’ for either party can be likened to getting a pre-qualifying letter from an online lender when attempting to secure financing for a home,” added Mr. Minkow.  “Funding a 6 billion dollar LNG plant is another matter entirely.”
In addition, InterOil and Mitsui have not made any official confirmation about the "Commitment Agreement."

Are InterOil's potential partners living on hope?

Many short sellers, including Minkow believe that InterOil is fraudulently reporting potential oil and gas reserve estimates to manipulate the market price of its shares. The company still has no proven reserves as defined by SEC disclosure rules. Business Insider cites another short seller who claims that InterOil's own geologists say that the company is "lying" to Wall Street about its oil and gas finds.

Does it really matter if InterOil has a deal?

In any case, whether or not InterOil has found a real partner does not mean any confirmation of its claimed oil and gas finds. Back in my criminal days at Crazy Eddie, we always thrived to do business with the biggest dopes on Wall Street and elsewhere. Gullible investors living on hope are a criminal's wet dream. If InterOil's oil and gas claims don't pan out, its partners and investors will be left holding the bag.

InterOil's suspicious "heads of state" deal, later no deal with Petromin and China National Offshore Corp

On April 16, 2009, Bloomberg reported that Petromin, InterOil, and China National Offshore Corp, also known as CNOOC, reached an "initial accord" on a "proposed liquefied natural gas project" in Papua New Guinea:
China National Offshore Oil Corp., the country’s biggest offshore petroleum explorer, agreed to work with InterOil Corp. on a proposed liquefied natural gas project in Papua New Guinea.
The initial accord commits the Chinese company, InterOil and the Papua New Guinea-owned Petromin PNG Holdings Ltd. to agreeing commercial terms for the financing of the government’s stake in the project, Petromin said today in an e-mailed statement.
[Snip]

“Both InterOil and Petromin have commenced discussions with a number of major oil and gas companies to bring in a strategic partner to the InterOil project who will underwrite the project,” Petromin Managing Director Joshua Kalinoe said in the statement. “The heads of agreement now allows China National Oil to participate in that process.”
Note: Bold print and italics added by me.
A Raymond James report citing the Bloomberg article claimed that InterOil confirmed a "signed" agreement with Petromin and China National Offshore Oil:
InterOil has confirmed to us that such an agreement was indeed signed, while underscoring its preliminary nature. The agreement was in fact signed earlier this week in conjunction with the visit to Beijing by PNG’s Prime Minister Sir Michael Somare. We would point out that this is not the first time a visit by Sir Michael to a major economy has led to heightened interest from a large international energy company in the development of PNG’s energy resources.
Conflicting report by InterOil

However, on April 20, 2009, Upstream reported that InterOil contradicted earlier reports it was involved in the agreement with Petromin and China National Offshore Corp:
Papua New Guinea's state-owned company Petromin said it has signed an agreement with China National Offshore Oil Corporation (CNOOC) on co-operating in Liquid Nuigini Gas' planned liquefied natural gas project.
Petromin said the heads of agreement also included gas reserves owner InterOil, but an InterOil spokesman said InterOil was not involved in the agreement; rather it was a direct arrangement between Petromin ands CNOOC.
Note: Bold print and italics added by me.
Will history repeat itself? Reports of a deal, afterwards, no deal? In any case, criminals love investors or partners living on hope. Prospective partners may end up with a lot less oil and gas than they bargained for.

Written by,

Sam E. Antar

Disclosure:

I am a convicted felon and a former CPA. As the criminal CFO of Crazy Eddie, I helped Eddie Antar and other members of his family mastermind one of the largest securities frauds uncovered during the 1980's. I committed my crimes, simply because I could.

If it weren't for the efforts of the FBI, SEC, Postal Inspector's Office, US Attorney's Office, and class action plaintiff's lawyers who investigated, prosecuted, and sued me, I would still be the criminal CFO of Crazy Eddie today.

I do not own any InterOil securities, long or short. However, I assisted Fraud Discovery Institute in researching InterOil. Barry Minkow has publicly that he has held short positions in InterOil securities.

Comments

Popular Posts

Did a Clever SEC Bait Goldman Sachs into Compounding Its Legal Problems With the "Kiss of Death" Message?

Updated: At 3:48 AM ET 04/20/2010 on bottom

The Kiss of Death

In filing its lawsuit against Goldman Sachs (NYSE: GS) on a Friday, the Securities and Exchange Commission sent what I call the "kiss of death" message to the embattled company. In other words, the SEC wanted to stick it to Goldman Sachs and Fabrice Tourre, the Executive Director of Goldman Sachs International, who is also a defendant in the complaint. While the SEC as a practice does inform target companies and individuals of an impending enforcement action, it does not always tell them exactly when such an action will be filed.

Apparently, the SEC filed its lawsuit without giving Goldman Sachs the heads up that it was planning to file it that day. Business Insider observed that Goldman Sachs was clearly unprepared to respond to the complaint as news of the lawsuit dominated the headlines all day. Goldman issued a short denial around noon and issued an extensive denial late in the afternoon, after most people had …

Overstock.com CEO Patrick Byrne Sleeps With a Gun

In numerous blog posts in the past, and in widespread media coverage, evidence has accumulated for years that Overstock.com CEO (NASDAQ: OSTK) Patrick Byrne has shown signs of being mentally unbalanced and paranoid.

Byrne has blamed his company's financial woes on an unnamed "Sith Lord." He hired paid goons to stalk his real and imagined adversaries and to write lengthy conspiracy theories on the Internet. Byrne has close ties with Bo Gritz. The Anti-Defamation League lists Bo Gritz as a far-right extremist with “extensive connections to both white supremacists and anti-government groups and leaders.”

Patrick Byrne's infamous temper tantrums when he doesn’t get want he wants are well documented too. He made obscene and misogynistic comments to a female reporter. He suggested that she gave “blowjobs” to Goldman Sachs traders. He suggested that a male reporter “Sucks It Likes He’s Paying the Rent.” An independent research analyst was told that “You deserve to be whippe…

Nature's Sunshine Products, Willbros Group, Cal Dive International, and BSQUARE Violate S.E.C. Rules on Calculating EBITDA

Nature’s Sunshine Products (NASDAQ: NATR), Willbros Group (NYSE: WG), Cal Dive International (NYSE: DVR), and BSQUARE (NASDAQ: BSQR) have recently issued earnings reports which include a calculation of EBITDA (earnings before interest, taxes, depreciation, and amortization) that apparently does not comply with Securities and Exchange Commission interpretations for Regulation G governing such non-GAAP financial measures. In each case, their erroneous EBITDA calculations have enabled them to significantly distort their financial performance by erroneously reporting a positive EBITDA, when they should have reported a negative EBITDA in the latest quarter.

How EBITDA is supposed to be calculated under Regulation G

According to the S.E.C. Compliance & Disclosure Interpretations, EBITDA is defined under Regulation G as net income (not operating income) before net interest, taxes, depreciation, and amortization. See below:

Question 103.01Question: Exchange Act Release No. 47226 describes E…

InterOil, John Thomas Financial, and Clarion Finanz: Anatomy of a Stock Market Manipulation Scheme

In this blog post, I will provide evidence of what I believe is a stock market manipulation scheme involving InterOil (NYSE: IOC), John Thomas Financial, and Clarion Finanz AG. I believe that InterOil with the assistance of Clarion Finanz concealed John Thomas Financial’s involvement in helping it raise $95 million through a private placement of convertible debt securities.

Clarion Finanz acted as a buffer between InterOil and John Thomas Financial to help InterOil hide John Thomas Financial's role in raising funds. Afterwards, InterOil filed false and misleading reports with the Securities and Exchange Commission in an effort to conceal John Thomas Financial’s role in helping the company raise $95 million in convertible debt.

Carl Caserta, who in 1991 was barred by the Securities and Exchange Commission from “association with any broker, dealer, or investment advisor” played a role in helping InterOil use John Thomas Financial to obtain funds from investors. InterOil, John Thoma…

Class Action Complaint against Amedisys uses Sarbanes-Oxley Act Corporate Governance Provisions to Battle Alleged Corporate Malfeasance

Updated at bottom of article

Last week, Pomerantz Haudek Grossman & Gross LLP filed a class action lawsuit against Amedisys (NASDAQ: AMED) charging the company, its CEO William F. Borne and its CFO Dale E. Redman with securities fraud.  In the next few days, Bernstein Liebhard LLP and Finkelstein Thompson LLP filed similar class action lawsuits against the company. The lawsuits allege that Amedisys abused Medicare's reimbursement system for at-home therapy care based on a compelling analysis of company revenues in an April 27 Wall Street Journal article.

In addition, the lawsuits innovatively utilize a provision under Section 406 of the Sarbanes-Oxley Act 2002 which provides a back-door way for investors to force ethical corporate governance and sue public companies for malfeasance. That provision requires Senior Financial Officers, such as the CEO and CFO of public companies, to abide by a strict code of ethics which broadly defines corporate malfeasance and effectively makes…