Tulsa World: SemGroup suitor drops out

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SemGroup suitor drops out
The colorful New York billionaire settles for asphalt assets.

John Catsimatidis addresses SemGroup employees in Tulsa last December. JAMES PLUMLEE/Tulsa World

By ROD WALTON World Staff Writer
Published: 7/21/2009 2:27 AM
Last Modified: 7/21/2009 6:27 AM

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

John Catsimatidis' departure from the SemGroup stage ends a colorful, competitive chapter in the company's yearlong bankruptcy proceeding. He came, he saw and he tried to conquer, but ultimately opted to take a small piece of the asphalt business and move on.

"Hopefully sanity will prevail," the New York billionaire said in a e-mailed response last week to a question about negotiations over the reorganization fight.

In the end, he apparently decided that a settlement under which he will buy some SemGroup LP asphalt assets for $3.9 million was preferable to a court hearing this week to decide control of the company.

A self-made magnate known for his brash ways in the grocery, energy and aviation sectors, Catsimatidis was alerted to SemGroup's possibilities by Tulsa businessman and friend Matt Coughlin. At the Tulsan's urging, he arrived at SemGroup promising to save the company's assets, preserving local jobs and perhaps even growing operations.

"What I see, I like," he told employees during a meeting on the SemGroup campus Dec. 22, while CEO Terry Ronan watched from the sidelines. "Some people have sex appeal; I have checks appeal."

Catsimatidis promised to contribute about $450 million from his own investors and deliver his specific

reorganization plan by the end of that month. The deadline was delayed several times, and his plan was never released.

Catsimatidis seemed to be sympathetic toward co-founder and former CEO Tom Kivisto's alleged role in SemGroup's collapse, calling it a "hedging mistake." SemGroup filed for Chapter 11 bankruptcy protection last July after reporting at least $2.4 billion lost in failed oil futures positions guided by Kivisto.

The New Yorker even sided with some industry officials who theorized that SemGroup's downfall was engineered by traders who reportedly knew the company's consistently short futures positions and went long, driving worldwide oil prices up to $147 per barrel.

"A $500 billion fraud on the world," Catsimatidis called it.

The court-appointed bankruptcy examiner, however, accused Kivisto of leading a "secretive" and speculative futures strategy that obscured SemGroup's failing positions and often traded oil inventory beyond what the company actually possessed.

Former FBI Director Louis Freeh, who oversaw the examiner's four-month investigation, alleged that Kivisto and fellow SemGroup co-founder Greg Wallace mismanaged the company, enriched themselves with improper bonuses and kept details of the trading strategy secret from co-workers.

"SemGroup's virtually blind deferral to Kivisto on trading matters, and its failure to develop or implement a suitable risk management policy, was central to its problems," the April 15 examiner's report states.

Kivisto did not answer questions by Freeh's investigators, and the report does not have any indictment power. The Securities and Exchange Commission and other federal officials are looking into the events surrounding SemGroup's collapse.

Kivisto's Tulsa attorney, John Tucker, has denied any wrongdoing by his client. Tucker has disputed Freeh's actual involvement in the investigation and argued that Kivisto managed his strategy according to accepted risk-management rules.

Wallace, who served as SemGroup chief financial officer until last summer, also refused to answer questions by the bankruptcy examiner. He later complained that the company's current executives were seeking scapegoats and had limited his access to information.

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 "Billionaire Catsimatidis to resign from SemGroup committee," which was published on 7/20/2009.

	Report Comment livinglarge, (7/20/2009 8:58:49 AM) must not be a good deal.
	Report Comment Daniel Day Simpson, Edmond (7/20/2009 9:09:36 AM) Looks like Davito in "Other People's Money".
	Report Comment Ric, Broken Arrow (7/20/2009 9:35:49 AM) A Fat Cat getting out while he can...?
	Report Comment Bullhead, Nicut (7/20/2009 9:50:13 AM) I think you're correct Ric.
	Report Comment misfit missy, no thanks (7/20/2009 10:47:24 AM) Bigalo,bigalo.
	Report Comment MaintenanceMan, Tulsa (7/20/2009 11:29:23 AM) Probably to much in-fighting. His deals were never met with positve reaction. Wish there were more details.
	Report Comment Rothko, Tulsa (7/20/2009 11:55:17 AM) I have not followed this closely So how does this affect the rest of the group he was working with? I guess since he was the money man that group will now not have financing to continue its bid particularly since he is endorsing current management reorganization plan.
	Report Comment okie ridgerunner, Small Country Town State Line (7/20/2009 12:11:05 PM) Smart man.
	Report Comment Popeye, T-Town (7/20/2009 12:20:22 PM) Via con Dios, Juan!
	Report Comment Better Than, Tulsa (7/20/2009 12:33:57 PM) Probably all talk and thought he could make some money on the sinking ship. They must be getting better. A friend that was laid off has been called back.
	Report Comment bent, (7/20/2009 1:31:21 PM) What a scumbag. Come in and give the emloyees some hope just to pull the carpet out from under us. No better than TR and the vultures ruining this company. They are riding this thing into the ground and sucking every last bit of value out of it as they go.
	Report Comment O&Gtrader, ft. worth (7/20/2009 2:54:59 PM) I wonder if part of his deal is to get his expenses back?
	Report Comment Ignatz, Broken Bow (7/20/2009 5:31:25 PM) Lokks like the guy who sang, "Hello Muddah, Hello Faddah."
	Report Comment black gold, (7/20/2009 6:22:44 PM) I recall last December that SemMaterials was a few short days away from a deal when the Cat man stepped in. That effectively ended that deal and delayed the sale of SemMaterials for many months. This put the new SemMaterials, Road Science, behind the eight ball for this years paving season, probably some employees gave up hope of a positive outcome in December and left the fold. The delay meant other laid off employees were probably not rehired. Thanks a lot Cat man. You appear to be just a lot of hot air. Or, is the picture of a rosy recovery for SGLP just smoke and mirrors and you are getting out while the getting is good?
	Report Comment Iamwatchingu, Broken Arrow (7/21/2009 6:40:30 AM) mmm Which asphalt assets are we talking about?
	Report Comment cobweb, (7/22/2009 12:51:22 PM) Cat Man could make a ton of money stopping clocks. Coyote ugly!
	Report Comment Hawktalk, (7/23/2009 8:22:22 PM) Black gold: SGLP stock is still +/- $5.00. Let me know when the rosy recovery kicks in.
	Report Comment Pinky, Tulsa (7/30/2009 6:33:17 PM) Ah, another effort by the Catman's Tulsa buddy that has failed. That's what friends are for! 7 months or more of frantic meetings that end with nothing for Tulsa, except a glimpse of the Catman and his brilliant Tulsa posse.

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