A former executive of U.S. operations at Canadian oil services company Poseidon Concepts pleaded guilty Wednesday to perpetrating a scheme to fraudulently inflate the company’s reported revenue, resulting in more than $886 million in shareholder losses, the Department of Justice announced.
Joseph Kostelecky, in his role as the highest-ranking U.S. executive at Poseidon, admitted he caused the company to falsely report approximately $100 million in revenue from purported long-term contracts with oil and natural gas companies that were customers. The misconduct occurred from approximately November 2011 to December 2012, according to court documents.
When the inflated revenue came to light in 2012, Poseidon’s stock price plunged, bankrupting the company and causing the shareholder losses, according to the Justice Department. “Kostelecky further admitted that he perpetrated the scheme to inflate the value of the company’s stock price and to enrich himself through the continued receipt of compensation and appreciation of his own stock and stock options.”
As part of his scheme, Kostelecky directed accounting staff at Poseidon’s U.S. corporate headquarters and a North Dakota field office to improperly record revenue from the contracts and misled management about his actions. He also caused the issuance of a public filing falsely reporting he had purchased a substantial number of shares in the company, the Justice Department noted.
Kostelecky pleaded guilty to one count of wire fraud and one count of securities fraud in the District of North Dakota. He is scheduled to be sentenced Jan. 10, 2022, and could face up to 40 years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.