Tulsa World: Exchange files claim against SemGroup

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Exchange files claim against SemGroup

This is an aerial photo taken in July 2008 of SemGroup's offices near 61st Street and South Yale Avenue. TOM GILBERT/World Staff Photo

By ROD WALTON World Staff Writer
Published: 5/27/2009 7:43 PM
Last Modified: 5/27/2009 7:52 PM

The New York Mercantile Exchange is opposing SemGroup LP’s move to sell its two seats on the futures trading floor unless the proceeds are first used to satisfy claims arising from transactions on the exchange, according to a filing Wednesday in a Delaware federal court.

The Nymex motion argues that SemGroup’s planned sale violates longstanding exchange rules. Tulsa-based SemGroup, which is in bankruptcy, filed its request to sell the two trading seats in April.

“SemGroup is asking the court to ignore this governing and long-settled authority and instead treat a Nymex membership as a debtor’s property right,” the motion reads.

SemGroup previously said it had not exercised its Nymex membership since it filed bankruptcy last July. The Tulsa-based company requested Chapter 11 protection after losing $2.4 billion in margin calls on oil futures trades.

Those futures transactions were made through the exchange, according to reports. The margin calls took such a big hit on SemGroup’s bottom line that it was forced to transfer the futures positions to the Barclay’s financial firm in mid-July, turning the account into a realized loss.

A U.S. Examiner’s investigation report alleged that SemGroup co-founder and former CEO Tom Kivisto guided a risky futures trading strategy that he hid from creditors and investors. Kivisto’s trading strategy was unbalanced heavily toward short positions, betting that rising oil prices would return to normal historic ranges, the report concluded.

Instead, oil futures prices hit

a record $147 per barrel by July 2008. SemGroup was forced to file for bankruptcy before the market receded beginning in late summer. Another SemGroup court case in which CEO Terry Ronan will be pitted against company suitor John Catsimatidis will have to wait three more weeks, but the direct questioning begins Thursday in New York.

Catsimatidis and other SemGroup management committee members will be the first principals questioned by attorneys in the battle over who has the right to run the company. The litigants will be deposed Thursday at the offices of their New York law firm.

Ronan and Catsimatidis filed lawsuits against each other earlier this year in Delaware and Tulsa, respectively.

U.S. Bankruptcy Judge Brendan L. Shannon, who is overseeing the SemGroup bankruptcy case in Wilmington, Del., ordered that the lawsuits must be heard together under his jurisdiction. The hearing was scheduled for Friday but has been moved to June 19. The SemGroup executives sued Catsimatidis in February, alleging that he violated a confidentiality agreement in his high-profile pursuit of the company. The suit also accused Catsimatidis’ group of trying to set up meetings with SemGroup officials behind Ronan’s back.

Catsimatidis fired back with his own lawsuit against Ronan last month in Tulsa. His legal volley alleged that Ronan violated his proper duties by trying to derail the SemGroup management committee throughout the Chapter 11 process.

Catsimatidis purchased the majority of seats on the management committee but does not own a direct or controlling interest in SemGroup shares. The management committee can enforce leadership decisions on SemGroup executives, but hedge fund Carlyle-Riverstone owns three seats and has veto power over any moves, according to reports.

Ronan, who took over as CEO when Kivisto was removed last summer, will be questioned Tuesday, court records indicate.

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Reader comments for this story have been moved to the most updated version of the story, now under the headline "SemGroup move opposed," which was published on 5/28/2009. So far, 2 comments have been made.