Tulsa World: SemGroup move opposed

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SemGroup move opposed
Nymex goes after any proceeds from selling seats on the exchange.

CEO
Terry Ronan: He alleges Catsimatidis violated confidentiality pact.

By ROD WALTON World Staff Writer
Published: 5/28/2009 2:31 AM
Last Modified: 5/28/2009 4:11 AM

Complete coverage: Read all the stories and documents related to the SemGroup collapse.

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.

Rod Walton 581-8457
rod.walton@tulsaworld.com By ROD WALTON World Staff Writer

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Some reader comments for this story were copied from "Exchange files claim against SemGroup," which was published on 5/27/2009.

	Report Comment Arbythree, Tulsa (5/28/2009 11:05:49 AM) I will be happy when this SemGroup stuff is all over.
	Report Comment O&Gtrader, ft. worth (6/9/2009 12:04:24 PM) Saw a report via Google News that the BK judge allowed some creditors to add 3 men's names to the $362 million lawsuit that the CEO was originally named in. The website was a subscription site and I haven't found the three new names on a public site yet. Still looking.

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