Former SAEX CEO pleads guilty to accounting fraud scheme
Former CEO and chairman of the board of directors of SAExploration Holdings Inc. Jeffrey Hastings pleaded guilty Friday for his role in a scheme to fraudulently and materially inflate the publicly reported revenue of SAEX by tens of millions of dollars and for misappropriating millions of dollars from the publicly traded seismic data company.
Hastings, 63, of Anchorage, Alaska, and British Columbia, Canada, pleaded guilty to one count of conspiracy to commit securities fraud, to make false statements in annual and quarterly SEC reports, and to make false statements to SAEX’s auditors, which carries a maximum sentence of five years in prison, and one count of conspiracy to commit wire fraud, which carries a maximum sentence of five years in prison.
The plea was made before U.S. District Judge Gregory Woods and announced by attorney for the United States Ilan Graff, who stated: “As he acknowledged in court today, Jeffrey Hastings schemed to inflate his company’s revenue, making it appear more profitable than it was. Hastings then stole money from the company for his own use. Hastings now awaits sentencing for his admitted fraud and deception.”
Hastings served as executive chairman of the board of directors for Houston-based SAEX until August 2016, then served as both chairman of the board and CEO until he separated from the company in August 2019. In May 2020, SAEX was delisted from the NASDAQ and, in December 2020, was taken private.
According to the allegations, from February 2015 to May 2019, Hastings, along with Brent Whiteley, the then chief financial officer and general counsel of SAEX, and Michael Scott, the then executive vice president of operations at SAEX, and “CC-1,” the founder and at various times president, CEO, and chief operating officer of SAEX, devised and carried out a scheme to defraud SAEX’s shareholders, bondholders, and the investing public by artificially and materially inflating SAEX’s reported revenue by making it appear that Alaskan Seismic Ventures, LLC was an independent and reliable source of tens of millions of dollars of revenue.
The allegations, contained in the superseding information, the superseding indictment, the complaint filed in the case, and statements made during the plea proceeding, outline the timeline of the scheme.
Beginning in February 2015, Hastings and Whiteley allegedly discussed finding a way for SAEX to take advantage of certain tax credits offered by the State of Alaska to seismic data library companies, to offset the costs of exploring for oil and gas in Alaska. When SAEX’s board was opposed to operating its own data library because of concerns about ensuring payment to SAEX, Alaskan Seismic Ventures (ASV) was set up by Hastings and Whitley to avoid the appearance that SAEX was operating a data library company that licensed data to third parties, according to the allegations. Hastings recruited an acquaintance to serve as the owner and sole employee of ASV, which was not independent and could not pay SAEX for its seismic data, the allegations continue, and then Hastings and Whiteley created and caused to be created a number of shell companies for the purpose of secretly transferring funds from SAEX into ASV.
The shell companies included Global Equipment Solutions, purported to rent seismic acquisition equipment to SAEX, though no equipment was rented or money owed between the two companies, according to the allegations, though the co-conspirators took steps to make payments appear legitimate, including drafting lease agreements and faking purchase orders.
SAEX had recorded approximately $12 million in payables to Global Equipment by the end of 2015, the allegations continue, with Hastings and his co-conspirators ultimately routing approximately $5.8 million of SAEX’s funds through Global Equipment and the other shell companies to ASV, with that money then going back to SAEX to pay outstanding receivables. This portion of the scheme was referred to by the men as “round-tipping,” and was not disclosed to investors.
Additionally, the allegations state that Hastings and Whiteley then misappropriated more than $5 million of the funds that SAEX transferred to Global Equipment for their own use
Hastings is scheduled to be sentenced by Judge Woods on Nov. 15, 2021, while Whiteley and Scott have already pleaded guilty and await sentencing before Judge Woods.