Ex-Nat'l Oilwell Varco Execs Accused Of $1M Fraud Scheme
Law360, Houston (May 23, 2016, 3:03 PM ET) -- National Oilwell Varco LP accused four fired executives Friday of perpetrating a $1 million scheme whereby the drilling components provider rented heavy machinery at inflated rates from their straw-man company.
Dubai, United Arab Emirates, residents Sadeesh Sadagopan, a former vice president of administration; Majed Hamden, a former vice president of sales; Khaled Zantout, a former regional sales manager; and an unnamed executive all financially benefited from overcharging NOV, according to Friday's petition in Harris County court, and a spreadsheet tracking payouts and other documents evidence the scheme.
“Defendants acted individually and collectively, and/or in concert with a senior executive officer of NOV (the executive) between at least 2009 and March 31, 2016,” the petition states. “NOV leased equipment, including forklifts, a truck and a shop cleaner at highly inflated prices from a strawman company controlled by defendants and the executive.”
When reached Monday, counsel for NOV declined to offer clarity on the unnamed executive who is accused in the scheme but is not named as a defendant. But the petition says the executive had joined an NOV predecessor more than 20 years ago as a design engineer and in 1997 was transferred to Dubai to establish the company's Middle East and North Africa operating region. In 2010, according to the petition, he was promoted to a senior role and transferred to Houston then promoted again in 2014.
According to the petition, Sadagopan had been hired in 1999 and by 2005 served as VP in MENA. Hamden joined the company in 2003 as VP of sales for land rigs in MENA, and Zantout served as regional sales manager for land rigs in MENA since about 2005 or 2006.
Sadagopan admitted his “improper financial interest in the strawman company,” according to the petition. The unnamed executive also allegedly admitted to taking the funds when confronted, the suit says. NOV fired all four employees when they “failed and refused” to provide NOV with certain information about the scheme, according to the petition.
The scheme was uncovered, NOV alleges, when the company received a whistleblower tip in 2016 about the conflict of interest involving the company's leases of certain heavy equipment with Global Business Supply. After an investigation, NOV found that between 2009 and 2016, NOV paid more than $1.7 million for leased equipment that had a sales value of less than $300,000.
Sadagopan was responsible for negotiating those leases on behalf of NOV and, “with the executive's knowledge and participation,” would thwart efforts of other NOV employees to lease the equipment at lower prices. The various leases with GBS were signed by the unnamed executive, with Hamden and Zantout also involved, NOV alleges.
GBS, prior to 2009, was an office supply company. According to the petition, it stopped selling office supplies and around that time began to lease heavy equipment. Sadagopan was the registrant and owner of the company's website, and would use his personal email address to invoice NOV, according to the petition.
NOV alleges that the named defendants would bring some of the unnamed executive's share of the proceeds to the U.S. and delivered them in cash, and that the executive picked up cash when he traveled to Dubai. The company also told the court it found a spreadsheet it believes shows that the executive also received payments via travel expenses and arrangements paid for by Sadagopan.
NOV alleges fraud, conspiracy to defraud, breach of contract and aiding and abetting breach of fiduciary duty, and is seeking more than $1 million in damages and disgorgement.
NOV is represented by Richard W. Staff and Jeff Weems of Staff Weems LLP
Counsel and contact information for the defendants was not available Monday.
The case is National Oilwell Varco LP v. Sadagopan et al., case number 2016-33540, in the 334th Judicial District Court of Harris County, Texas